H.—27

2

extent of the proposed exchequer bills, instead of their balances being wholly paid over in imported gold, while their dividends will be proportionately increased not only by the interest, but by the saving in transport, &c, while the colony would reap an incalculable benefit by £315,000 being expended in permanent agricultural improvements instead of lying unproductive in the banks, which does not seem an excessive concession to that interest, compared with £100,000, which, if I remember rightly, was set apart by a former session of Assembly for the encouragement of gold-mining. I propose that a sum, in £1,000 bills, to be called " Colonial Exchange Exchequer Bills," be allocated to each bank in proportion to say £30 per cent, of their notes in circulation, which at 30th June last, taking these bills at £315,000, rather exceeds 30 per cent. That these bills bear interest at 2'63d. per cent, per day, equal to £4 per annum, payable by Government half-yearly, when new bills would be issued, in the same manner as is done by the Scotch banks, to the extent of £300,000, bearing interest at lid. per cent, per day. That any bank holding more than its quota of bills shall be bound to sell to a bank holding less, the purchaser paying in gold or by draft on London, say at 20 days' sight. That a central point, say Wellington, be fixed for a weekly general exchange for the whole colony, and the exchange bills be retained at the banks there, to effect which increased postal conveniences obviate any difficulty. That the total amount in lieu of these bills be handed over by the banks at as early a date as possible, and then distributed to applicants by authority of a Drainage Commissioner under the Act, the same to bear interest at 8 per cent, per annum, by which principal and interest is liquidated under ten years; but, as the country is likely to require money for similar improvements for a much longer period, and for a much larger sum, the repayment of balance of interest would still be available to re-lend, and the arrangement with the banks might not need alteration for many years to come. A further (it is to be hoped problematical) advantage would be, in the event of the descent of a privateer on any of our chief cities, there would be so much less gold left for plunder. I might further add that, viewing the disproportionate amount of gold coin, viz., £1,717,568, and bullion, £152,837, to the amount of notes in circulation, viz., £995,314, it would not have been too much to have proposed £500,000 exchange exchequer bills, as the security to the banks would be first guaranteed by Government as the whole colony, and then by every landowner individually who availed himself of the Act; and, to concentrate the financial management, all bank-notes issued in the colony should be made payable (that is dated) in Wellington (should that city be chosen as the centre where the balances of exchange are settled), and the chief amount of gold held there. Even were these proposals slightly detrimental to the profits of the banks, the public benefit would be so great that they would have no more reason to complain than any foreign (outside) insurance company starting in the colony, which, if I remember, has to first invest £20,000 in Government securities ; but the position of the banks is very different, as the interest at 4 per cent, on the £315,000, amounting to £12,G00 payable each year, may be expected to stand nearly thus at the end of say about ten years: by extending the working one year or so more there would be sufficient surplus to cover Commissioners' salaries: —

GOVERXJIEXT. De. £ s. d. I Cr. £ a. d. To Gold received from Banks ... ... 315,000 0 0 By Exchange Exchequer Bills repaid ... 315,000 0 0 Keceived in interest and compound in- Advances under the Act, not including terest from parties availing them- Commissioners' salaries ... ... 315,000 0 0 selves of the scheme ... ... 315,000 0 0 £630,000 0 0 £630,000 0 0 Banks. Dr. £ a. d. I Ce. £ s. d. To Exchange Exchequer Bills repaid ... 315,000 0 0 By Gold from Banks ... ... ... 315,000 0 0 Total return on transaction to profit ... 226,723 0 0 Say 10 years at 4 per cent. ... ... 126,000 0 0 Compound interest, at, say, 8 per cent, on yearly progressive payments of £12,600 interest re-lent out ... 100,723 0 0 £541,723 0 0 £541,723 0 0

BANK RETURNS (See Gazette, June 30, 1878).

Proposed ExName of Bank. Notes. G-old. Bullion. change Exehqr. Bills. £ £ £ £ Bank of New Zealand ... ... ... 512,236 701,850 84,467 155,000 Union Bank of Australia ... ... 138,494 351,386 9,004 45,000 Bank of New South "Wales ... ... 91,637 298,652 21,186 30,000 Bank of Australasia ... ... ... 53,209 88,143 1,600 20,000 National Bank of New Zealand ... ... 111,830 181,178 21,818 35,000 Colonial Bank of New Zealand ... ... 87,905 96,355 14,760 30,000 995,313 1,717,564 152,835 315,000 I have, &c, TnOMAS MlTEBAY. By Authority: G-EOBaE Didsbuet, Government Printer, Wellington.—1878. Price 3d.]