Government financial institutions in New Zealand to 1914

Abstract

This thesis reviews government involvement in the New Zealand financial system before 1914 and attempts to determine the arguments used and their validity. Principal sources are the project, 'The Growth and Role of the N.Z. Financial System' conducted by Professor G.R. Hawke and Professor D.K. Sheppard of Victoria University since 1979, the Parliamentary Debates, the Appendices to the Journals of the House of Representatives and published histories of institutions concerned. The Introduction summarises the theoretical background and briefly details the general economic trends. Chapter 1 discusses the size of the government involvement, the structure of the financial system, private institutions, government finances, the involvement of New Zealand financial institutions (voluntary or otherwise) in holding government securities and trends in interest rates. The remaining three chapters look at the creation and operations of the various government linked financial institutions. Chapter 2 concentrates on State Banking. This begins by discussing the short-lived Colonial Bank of Issue and subsequent attempts to create a successor, then goes on to discuss the Bank of New Zealand rescue, the State Advances scheme and the allocation of the government bank account. Chapter 3 discusses the two Savings Bank systems. It outlines the history of the original British institutions and the New Zealand versions. This is followed by discussion of interest rates, competition between the two systems, the regional distribution of savings and the investment policies of the Trustee Savings Banks. Chapter 4 discusses State Accident and State Fire Insurance, Government Life Insurance, the Public Trust Office and the superannuation funds. The Conclusion argues that government involvement was based on various combinations of the following ideas : (i) desire to promote self-provision of retirement income; (ii) mobilisation of small savings; (iii) promoting of economic growth through (a) provision of cheap credit for farmers (b) fostering confidence in the economy and financial system (BNZ rescue); (iv) filling a gap in private sector provision of financial services; (v) prevention of unfair trading practices; (vi) provision of a guaranteed investment or savings with a below market return; (vii) financing of government activities; (viii) a State Bank; (ix) protection and promotion of New Zealand interests against foreign competitors.