OVERSEAS EXCHANGE

Waikato Times, Volume 124, Issue 20832, 16 June 1939, Page 10

OVERSEAS EXCHANGE

BANK CHAIRMAN’S REVIEW CAUSES OF THE HEAVY DECLINE ANNUAL MEETING OF THE B.N.Z. (Special lo Times) WELLINGTON, Friday. Overseas trade and exchange control was among the subjects discussed by the chairman, Mr A. T. Donnelly, in his address to the annual meeting of the Bank of New Zealand to-day. The following table shows the rapidity with which New Zealand's overseas funds have declined, he said, showing j the overseas funds of the Reserve

The March years show that funds fell from £15.2 millions to £9.3 millions during live years. The initial decrease was £l.l millions, followed by £9.7, £7.8, and finally by £17.3 millions, giving a total of approximately £36 millions. The main items affecting New Zealand's overseas funds for which official statistics can be obtained are:— Exports and imports, interest on public and local authorities’ debts and j public and local authorities’ debt move- . ments. After these accountable items . have been tabulated, there remains a j balance which is attributable to the repatriation of funds temporarily domiciled in New Zealand, the investment of New Zealand funds in overseas securities, and those funds for butter ! and cheese which are not now credited until the produce has been sold. Although it is impossible to obtain accurate figures which would classify the main items concerned, it seems probable that repatriation of capital, and overseas investment by the people of New' Zealand, have been important factors. Importing Too Heavily The purposes of the control regulations are to ensure that the proceeds of the country's produce shipped overseas, (other than dairy produce —the proceeds of which are received by the Reserve Bank) will be received by the trading banks and held by them on behalf of the Reserve Bank, that imports will be controlled, and that the transfer of funds overseas for other than trade purposes will be sub - ject to permit from the Reserve Bank. Unfortunately the London funds position was such that the Government had no alternative but to limit imports in an endeavour to conserve and build up the country's London resources. It was regrettable that this necessity should have led to restrictions which have had, and will have, a very serious effect on the business of the country and on many of those engaged in the import trade for their living, but ft is not generally appreciated that the country has been importing too heavily and that traders have had three years of unusual pros perity.

The Government in applying its restrictions has obviously aimed at the encouragement of local industry, and imported goods competing with local manufactures have peen severely restricted. Luxury goods have naturally | been cut, but the exigencies of the position have made it necessary to reduce largely many classes of goods in common use. It is reasonable to assume that restrictions on these classes of goods will be modified as soon as the London funds position warrants. Relations With Government I should like to refer to the relationship between the bank and the Government. It is the duty of the Government to manage the alTairs of the country according to its policy. It is the duty of the bank, as the largest trading bank in the Dominion, to help the Government wherever it can and as much as it can. It is admitted that this bank and the trading bapks as a unit have done all that can be done within the limit of their resources and the existing system to maintain the public and private finances of the Dominion. The trading banks subscribed substantially to the £4,500,000 Loan recently issued, this bank's application being for £500,000. At balance date we held New Zealand Government securities amounting to £5,540,847. The Government is a shareholder In the bank and has by law the right to appoint a majority of the directors on the board. There have been occasional discussions between executive officers, the directors and the Minister of Finance during the term of present Government. Such 'discussions as there have been have taken place in discharge of the duty whch lies on the bank to help the Government in the administration of that part of the financial system of the country which is covered by the business of the hank. Any discussions have always been In general terms and there has not, nor could there ever be, any discussion or disclosures of the business of any customer of the bank unless express prior authority had been given to the bank by the customer. The secrecy and the sacredness of the relation between banker and customer is protected by the tradition of centuries and the law of the land. In all respects the present Government has kept the high standard of propriety which has always marked the relationship between the bank and the Government of the day since 1894, and the business of the bank is now conducted as it always has been in the past. Its capital, and your capital as shareholders, and the moneys of depositors are as safe as they have ever been in the history of tiie bank. An interim dividend of 5 per cem on ordinary shares was paid in December last. A further 5 per cent is now being paid, making 10 per cent for the year.

Bank and the trading banks: £ (N.Z.) Millions. 1934- 1935- 1936- 1937- 1938Year end. 35 36 37 38 39 June ... 46.0 4 1.0 37.0 26.1 sept. ... 40.3 40.0 34.0 30.0 17.0 Derr. ... 40.5 36.1 28.1 23.7 6.8 March .. 45.2 44.1 34.4 26.6 9.3