7

H.—43

These three sources of profit, when combined, result in a very large profit to those who issue the orders. It is clear from the table that the borrowers contribute less than the retailers to the total profit; and, moreover, the result of a reduction of the period of credit from a month to a fortnight shows a considerable decrease in the nominal and effective rate of interest earned. It should be noted also that the nominal rate of interest is fifty-two times the weekly rate of interest, and that the effective rate of interest is the total interest earned by a unit of capital on the assumption that the actual periodical interest is immediately invested as it becomes due on the same terms as the original capital. The table has been submitted to the Government Actuary, who has certified to its correctness.

Interest earned by Cash-order Concerns.

A further factor that must be taken into consideration is the effect upon the retail houses in giving a 12J per cent, discount. The evidence, whilst somewhat varying as to overhead charges, showed conclusively that, taking general-drapery business, the gross overhead costs ranged from 22| per cent, to 30 per cent. Taking a rough average of, say, 25 per cent., it is obvious that a discount of 12| per cent, must be added to the price of goods if the system grows in such volume that the bulk of the sales are effected by cash orders. It is difficult to say at just what point the giving of a 12| per cent, discount would make the revision of all prices essential, but it is clear to us that, irrespective of the volume of cash orders dealt with, the public must pay the discount granted either in part or in full. For the purpose of arriving at definite recommendations we submit the following questions, the answers to which embody our views : — Is the system so general in New Zealand as to constitute an undesirable form- of credit ? It has not yet reached such a stage, but in Auckland if it remains unchecked it is likely to reach such dimensions as to raise the cost of living generally. There is a danger also of the system spreading in the other centres and towns unless some control is exercised. Is the system of benefit to the ivorking classes ? To a limited extent, Yes. This form of credit is no doubt of assistance to workers in casual employment and not in receipt of regular wages. We are definitely of the opinion, however, that the beneficial scope for this class of credit is limited, and that it is probably one of the most expensive forms of credit of which the worker could avail himself.

j ! Premium Total Payments Period for on Com- (including Pre- Discount Amount 1 ros<J By whom the Re- Face mission mium) made by allowed by actually ad- p ro jj Example. Cash Order is payment Value of paid at the Borrower Trader to vanced by Cash issued. ' of Cash Order. Time before Trader Cash-order Cash-order , , p Order. i Order is receives Payment Co. Co. issued. (Monthly Terms). Weeks. £ s. d. £ s. d. % s. d. £ s. d. s. d. 1 Cash-order Co. 20 5 10 0 1 10 0 12| = 12 6 2 17 6 22 6 2 „ 20 5 5 0 1 5 0 121 = 12 6 3 2 6 17 6 3 18 5 Nil. 1 10 0* 12f = 12 6 2 17 6 12 6 4 „ 20 5 5 0 0 15 Of 12£ - 12 6 3 12 6 17 6 Interest-yield to the Cash-order Traders. Nominal Rate per Annum (Convertible Weekly). Effective Rate per Annum. „ . From Borrower's] From all Sources From Borrower's From all Sources jxamp e. jp rom Borrower's Premium and j (including From Borrower's Premium and (including Premium Trader's Credit Premium Trader's Credit alone. I2J per Cent. allowed by alone. I2i per Cent. allowed by Discount. Trader). Discount. Trader). Per Cent. Per Cent. Per Cent. Per Cent. Per Cent. Per Cent. 1 53 133 267 70 272 1,248 2 26 99 179 29 167 482 3 (Loss) 84 176 (Loss) 131 464 4 26 99 127 29 167 250 * 10s. deposit paid at time of receiving order. f Fortnightly terms.