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Anglo-New Zealand financial relations, 1945–611

Published online by Cambridge University Press:  12 September 2008

John Singleton
John Singleton
Affiliation:
Victoria University of Wellington
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Financial History Review , Volume 5 , Issue 2 , October 1998 , pp. 139 - 157
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Copyright © European Association for Banking and Financial History 1998

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References

2 SirHancock, Keith, Survey of British Commonwealth Affairs, II, pt 1 (London, 1940), p. 197.Google Scholar

3 ibid., pp. 193–4, 197–8.

4 Schenk, C. R., Britain and the Sterling Area (London, 1994).Google Scholar

5 For an overview of New Zealand's political economy in this period, see Mabbett, D., Trade, Employment, and Welfare: A Comparative Study of Trade and Labour Market Policies in Sweden and New Zealand, 1880–1980 (Oxford, 1995).Google Scholar

6 Hawke, G. R., The Making of New Zealand: An Economic History (Cambridge, 1985)Google Scholar, ch. 7; idem, ‘Depression and recovery in New Zealand’, in Gregory, R. G. and Butlin, N. G. (eds), Recovery from the Depression: Australia and the World Economy in the 1930s (Cambridge, 1988)Google Scholar; Endres, A. M., ‘The development of economists’ policy advice in New Zealand, 1930–34’, Australian Economic History Review, 30 (1990)CrossRefGoogle Scholar; Endres, A. M. and Jackson, K. E., ‘Policy responses to the crisis: Australasia in the 1930s’, in Garside, W. R. (ed.), Capitalism in Crisis: International Responses to the Great Depression (London, 1993)Google Scholar; and Fleming, G., ‘Keynes, purchasing power parity and exchange rate policy in New Zealand during the 1930s depression’, New Zealand Economic Papers, 31 (1997).CrossRefGoogle Scholar

7 An unsuccessful attempt was made to negotiate a bilateral trade agreement with Britain during 1936–37: Drummond, I. M., The Floating Pound and the Sterling Area (Cambridge, 1981), pp. 107–8.CrossRefGoogle Scholar

8 Hawke, , Making of New Zealand, pp. 163–6.Google Scholar

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11 The impetus for the creation of RBNZ did not come from supporters of a loose monetary policy; the advocates of a central bank were more concerned to draw a clear distinction between the monetary systems of New Zealand and Australia: Hawke, G. R., Between Governments and Banks: A History of the Reserve Bank of New Zealand (Wellington, 1973), chs 1–5Google Scholar; and idem, ‘The government and the depression of the 1930s in New Zealand: an essay towards a revision’, Australian Economic History Review, 13 (1973).Google Scholar

12 Cain, P. J. and Hopkins, A. G., British Imperialism: Crisis and Deconstruction, 1914–1990 (London, 1993), PP. 90–2Google Scholar; Sayers, R. S., The Bank of England, 1891–1944 (Cambridge, 1976), 11, pp. 512–19Google Scholar; and Plumptre, A. F. W., Central Banking in the British Dominions (Toronto, 1940), pp. 183–201.Google Scholar

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14 Cain, and Hopkins, , British Imperialism, 1914–1990, pp. 136–7Google Scholar; and Drummond, , Floating Pound, pp. 103–15.Google Scholar

15 McKinnon, M., ‘Equality of sacrifice: Anglo-New Zealand relations and the war economy, 1939–45’ Journal of Imperial and Commonwealth History, 12 (1984)CrossRefGoogle Scholar; and idem, The impact of war: a diplomatic history of New Zealand's economic relations with Britain, 1939–1954, Ph.D. thesis (Victoria University of Wellington, 1981).Google Scholar

16 Pressnell, L. S., External Economic Policy Since the War, 1 (London, 1986), p. 366Google Scholar; and Fforde, J. S., The Bank of England and Public Policy, 1941–1958 (Cambridge, 1992), pp. 101–3.Google Scholar

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19 Eichengreen, B., Golden Fetters. The Gold Standard and the Great Depression 1919–1939 (Oxford, 1992).Google Scholar Hancock was aware of the links between ‘social democracy, economic nationalism, the international exchange of goods, [and] … money and credit’ in interwar New Zealand: Survey, p. 189.Google Scholar

20 Sinclair, K., Walter Nash (Auckland, 1976), pp. 100–8.Google Scholar On Social Credit theory, see King, J. E., Economic Exiles (London, 1988), pp. 136–60.CrossRefGoogle Scholar

21 Sinclair, , Walter Nash, p. 244.Google Scholar

22 New Zealand Archives, Wellington [hereafter NZA]: Prime Minister [hereafter PM], 22/7/8, ‘Postwar financial plans’, 01 1944, p. 9.Google Scholar

23 NZA: PM23/3/1, Nash to External Affairs, 14 Mar. 1947.

24 Bank of England Archive, London [hereafter BoE]: Overseas Finance [hereafter OV], 59/14, Fussell to Catto, 12 Feb. 1947.

25 The literature on Anglo-American squabbling is voluminous; for a racy account, see Charmley, J., Churchill's Grand Alliance: The Anglo-American Special Relationship, 1940–57 (London, 1995).Google Scholar

26 Sinclair, , Nash, pp. 241–6Google Scholar; McKinnon, M., ‘The new world of the dollar’, in McKinnon, M. (ed.), The American Connection (Wellington, 1988), pp. 115–17Google Scholar; and Horsefield, J. K., The International Monetary Fund 1945–1965, 1 (Washington, 1969), pp. 48, 94, 96, 98, 121, 163.Google Scholar

27 NZA: External Affairs [hereafter EA] 1, 104/4/1, Pt 7, Ministry of External Affairs to Lord Addison, 19 Jun. 1946. The ITO never materialised. The scope of GATT was more limited.

28 Horsefield, J. K. and de Vries, M. G., The International Monetary Fund 1945–1965, II (Washington, DC, 1969), pp. 230, 238–40.Google Scholar

29 Other countries, including Australia, were lukewarm about GATT and the Americans did not want to provoke a crisis. See Foreign Relations of the United States [hereafter FRUS], 1 (1949)Google Scholar, ‘Confidential report by the chairman of the US delegation to GATT’, 10 11. 1949, pp. 722–3Google Scholar; and Eisenhower Library, File 1952–1953 (2), Official File OF 149–B, Box 767, White House Central File, ‘Position paper on Special Exchange Agreements’, 1 09. 1953.Google Scholar

30 NZA:EA1, 104/4/1, Pt 4, ‘Notes on Bretton Woods’, 20 12. 1945Google Scholar; and Pt 7, Addison to Minister of External Affairs, Wellington, , 19 07. 1947.Google Scholar

31 Public Record Office, London [hereafter PRO]: Treasury [hereafter T] 236/1300, ‘Subjects for discussion with Nash’, 22 05 1947.Google Scholar This argument was unlikely to impress New Zealand.

32 Bell, P. W., The Sterling Area in the Postwar World (Oxford, 1956), pp. 36–7.Google Scholar

33 NZA: EA1, 154/7/2, Webb to McIntosh, 6 Aug. 1948.

34 FRUS, VI (1948)Google Scholar, ‘Policy statement of the Department of State: New Zealand’, 24 09. 1948, p. 11.Google Scholar

35 Hogan, M. J., The Marshall Plan: America, Britain and the Reconstruction of Western Europe, 1947–1952 (Cambridge, 1987), pp. 170–3.CrossRefGoogle Scholar

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38 PRO: T238/249, ‘Negotiations with New Zealand’, 18 06. 1948.Google Scholar

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40 The term ‘British complex’ was used in Washington to describe Britain's global interests. See Charmley, , Churchill's Grand Alliance, p. 237.Google Scholar

41 Overseas Trade and Finance with Particular Reference to New Zealand (Wellington, 2nd ed., 1966), p. 167.Google Scholar

42 PRO: T229/545, ‘Notes on talks with Australian and New Zealand representatives’, 29 Sep. 1948.

43 NZA: T1, 61/1, Pt 1, Ministry of External Affairs to UK High Commission, Wellington, 11 05 1948.Google Scholar

44 ibid., ‘New Zealand balance of payments’, 13 05 1948, p. 8.Google Scholar It appears that, during 1949, New Zealand contemplated the possibility of a dollar loan to cover the dollar deficit and relieve pressure on the dollar pool. See Ti, 61/1/5, ‘Extract from Letter dated 2 09. [1949]Google Scholar from Rt. Hon. W. Nash to Sir Carl Berendson'; and McKinnon, , ‘World of the dollar’, pp. 120–1.Google Scholar

45 This figure is an aggregate of public and private sector net capital flows: Rosenberg, W., ‘Capital imports and growth – the case of New Zealand – foreign investment in New Zealand, 1840–1958’, Economic Journal, 71 (1961), p. 101CrossRefGoogle Scholar; and Conan, A. R., Capital Imports into Sterling Countries (London, 1960), pp. 8–13.Google Scholar The inflow of British capital into New Zealand averaged four per cent of gross domestic fixed capital formation between 1949 and 1957: see Schenk, , Britain and the Sterling Area, p. 111.Google Scholar

46 Guest, M. W., The Murupara Project: the Tasman Pulp and Paper Company Ltd and industrial development in New Zealand 1945–1963, M.A. thesis (Victoria University of Wellington, 1997), P. 39.Google Scholar

47 NZA: T25/23, ‘Capital works programme’, 24 03. 1950Google Scholar; and ‘Repayment of New Zealand's London debt’, 11 01. 1950.Google Scholar

48 During 1950, Treasury did not regard IBRD as an attractive source of finance, pointing out that it lent small sums at high rates of interest: see NZA: T1, 61/1/5, ‘Dollar loan’, 13 Jan. 1950; ‘Notes re borrowing on the London market’, undated 1950; and ‘Notes on the Special Exchange Agreement, Fund and Bank membership, and the raising of dollars’, undated 1950.

49 BoE: Governors papers [hereafter G], 3/16, ‘Note of conversation between Cobbold and Rowan’, 18 Jun. 1952; G3/56, Cobbold to Gilbert, 13 Jun. 1952; OV59/4, Snelling, to Stevenson, 22 04. 1952Google Scholar; and Snelling to Morley, 22 Apr. 1952.

50 NZA: T1, 52/539/14, Pt 1, Woodward, to Ashwin, , 18 09. 1953 and 2 10. 1953Google Scholar; Guest, ‘Murupara’, pp. 68–70Google Scholar; and Kaufman, B. I., Trade and Aid: Eisenhower's Foreign Economic Policy, 1953–1961 (Baltimore, 1972), pp. 29–32.Google Scholar

51 NZA: T1, 61/3/12, Pt 5, ‘Brief for Commonwealth Economic Conference’, 10. 1952, pp. 165–6.Google Scholar

52 NZA: T1, 52/880/2/2, ‘New Zealand membership in IMF and the IBRD’, 14 03. 1952Google Scholar; and ABTW 6986, Acc. W4656, RBNZ board minutes, 24 01. 1952.Google Scholar

53 BoE: G3/107, ‘New Zealand pulp and paper development’, 29 01. 1952Google Scholar; and Fforde, , Bank of England, pp. 423–5.Google Scholar

54 PRO: Dominions Office [hereafter DO], 35/6489, ‘Confidential annex to proceedings of the Commonwealth Economic Conference’, 12. 1952Google Scholar; and Schenk, , Britain and the Sterling Area, p. 38.Google Scholar In 1955 CDFC invested £3m. in Murupara: see Guest, ‘Murupara’, pp. 73–4.Google Scholar

55 New Zealand Parliamentary Debates, CCXCIX, 18 04. 1952, p. 313.Google Scholar

56 The ‘Collective Approach’ was vetoed by the Americans. See PRO: DO35/6478, ‘Prime Ministers’ Conference: Note from Financial Adviser at the UK High Commission, Wellington’, 8 Nov. 1952; and SirCairncross, Alec (ed.), The Robert Hall Diaries 1947–53 (London, 1989), p. 248.Google Scholar

57 PRO: DO35/6479, Price, to Swinton, , 19 02. 1953.Google Scholar

58 Housing was later deleted from the purposes of this loan: see NZA: T1, 61/1/5, Ashwin, to Rowan, 26 03. 1954Google Scholar; Rowan, to Ashwin, 15 04. 1954Google Scholar; PRO: T236/544O, ‘Second progress report on United Kingdom investment in the sterling Commonwealth’, 27 11. 1953Google Scholar; BoE: OV59/4, ‘New Zealand: application for a £10m. loan from London’, 28 05 1954.Google Scholar

59 The bridge scheme would not have assisted the Sterling Area's balance of payments and derived from local political rivalries: see PRO: T236/5439, ‘First progress report on United Kingdom investment in the sterling Commonwealth’, 10 08. 1953Google Scholar; and T236/544O, ‘Third progress report on United Kingdom investment in the sterling Commonwealth’, 31 05 1954.Google Scholar

60 BoE: OV/59/5, Greensmith, to Rowan, 2 12. 1955.Google Scholar See also NZA: T1, 61/1/5, ‘Note of meeting at the United Kingdom Treasury’, 23 09. 1955.Google Scholar

61 PRO: T236/5442, ‘Washington meetings – Sep. 1956: state of the London market’, 13 Sept. 1956.

62 This flotation was later merged into the £20m. 1958 loan operation.

63 BoE: OV59/5, Jenkyns, to Haslam, , 10 10. 1956Google Scholar; ‘New Zealand: London market borrowing’, 17 10. 1956.Google Scholar

64 NZA: T1, 61/1/5, Rowan, to Greensmith, 29 10. 1956.Google Scholar

65 PRO: Board of Trade [hereafter BT] 213/96, Lee to Littler, 16 May 1957.

66 Schenk, , Britain and the Sterling Area, pp. 48, 92–3.Google Scholar

67 NZA: T1, 61/1/5, Scrirngeour, to Greensmith, , 19 09. 1957.Google Scholar

68 Social Credit leaders were given a brutal mauling by the Royal Commission: see Report of the Royal Commission on Monetary, Banking, and Credit Systems (Wellington, 1956), pp. 179, 180–8Google Scholar; and Hawke, G. R. and Wijewardane, B. A. D., ‘New Zealand and the International Monetary Fund’, Economic Record, 48 (1972), p. 93.CrossRefGoogle Scholar

69 NZA: T1, 52/880/2/2, ‘International Monetary Fund- New Zealand capital needs’, 20 04. 1956.Google Scholar

70 BoE: OV59/5, ‘New Zealand: London market borrowing’, 17 10. 1956.Google Scholar

71 ibid., Greensmith, to Rowan, 15 06. 1956Google Scholar; Rowan, to Greensmith, , 3 07. 1956Google Scholar; Haslam, to Jenkyns, , 10 09. 1956Google Scholar; PRO: DO35/5635. ‘New Zealand – current problems’, 6 09. 1956Google Scholar; and Report of the Royal Commission, pp. 179–80.Google Scholar

72 Hawke, , Between Government and Banks, p. 117.Google Scholar

73 NZA: ABTW 6986, Acc. W4656, vol. 5, RBNZ board minutes, 14 Nov. 1957, 12 Dec. 1957, 19 Feb. 1958 and 21 May 1958.

74 This sum included the £10m. issue already authorised for 1957–58, which had been delayed at Britain's request.

75 PRO: DO35/6522, ‘Discussion between the Prime Ministers of the UK and New Zealand on 24 01. 1958’Google Scholar; BoE: OV59/5, Jenkyns, to Bailey, , 21 02. 1958Google Scholar; and Hawke, and Wijewardane, , ‘New Zealand and the IMF’, p. 96.Google Scholar

76 BoE: OV59/5, Commonwealth Relations Office to UK High Commissioner, Wellington, 20 Mar. 1958; and Singleton, J., ‘New Zealand, Britain, and the survival of the Ottawa Agreement, 1945–77’, Australian Journal of Politics and History, 43 (1997).CrossRefGoogle Scholar

77 BoE: OV59/5, Greensmith, to Rowan, , 30 04. 1958.Google Scholar

78 ibid., ‘New Zealand: note of meeting at Treasury’, 14 05 1958.Google Scholar

79 The Anglo-New Zealand negotiations occasionally degenerated into farce. At one meeting, a New Zealand representative called Parker ‘was clearly under orders to minimise the documentation and asked whether the New Zealand Government might not have a direct cash advance against a gentleman's understanding that the money would be spent on British exports. Nobody was prepared to wear this’. Parker then asked whom he should see in the City to obtain a bank credit. The British responded that ‘as the New Zealand Government owned a bank in London [the Bank of New Zealand] Parker might well seek their opinion’: see BoE: OV59/5, ‘Note of meeting at the ECGD’, 3 07. 1958.Google Scholar

80 RBNZ also arranged a credit of £A10m. with the Commonwealth Bank of Australia, and £4.1m. sterling was borrowed from Australian insurance companies operating in New Zealand: see Wijewardane, , Official overseas borrowing, p. 19.Google Scholar

81 Arnold Nordmeyer was Minister of Finance. W. S. Goosman reported in NZPD, CCXIX, 22 Jul. 1959, P. 345.

82 Hawke, and Wijewardane, , ‘New Zealand and the IMF’, p. 95Google Scholar, state that Nash turned to New York because he was denied permission to raise all of the required finance in London. But the British were prepared to extend substantial official assistance to New Zealand in 1958. The British authorities were not to blame for the reluctance of private investors to take up New Zealand government issues.

83 BoE: OV59/5, O'Brien, to Armstrong, , 24 10. 1958.Google Scholar

84 ibid., O'Brien, to Stevens, , 22 10. 1958Google Scholar; and OV44/47, ‘Notes on discussions in New Delhi’, 13 03. 1959.Google Scholar

85 PRO: Cabinet [hereafter CAB] 134/1905, ‘Report by the Sub-committee on United Kingdom External Investments’, 6 03. 1959, paras 31, 32, 37.Google Scholar

86 Hawke, and Wijewardane, , ‘New Zealand and the IMF’, p. 95Google Scholar; and Simkin, C. G. F., ‘What should be done about the Sterling Area: New Zealand’, Bulletin of the Oxford University Institute of Statistics, 21 (1959), P. 272.Google Scholar

87 ZNA: T1, 52/880/2/2, Fisher to Nash, 10 Nov. 1958.

88 Farming and business leaders were keen to join IMF and IBRD. But there remained powerful opponents, such as the Dunedin newspaper, the Otago Daily Times, which made the following declaration on 5 05 1958Google Scholar: ‘New Zealand has just borrowed £20m. in Great Britain for development. By joining IMF we would get more money than could be most advantageously used at the present time. To join in order to obtain a short-term loan would be even more reprehensible. There are necessary adjustments to be made in our economy. Built-in shock absorbers may be required, but not rubber cushions bought with dollars.’

89 PRO: T236/649O, MacGillivary, to Symons, , 4 04. 1960, 15 06. 1960.Google Scholar

90 International Monetary Fund and World Bank: Implications of New Zealand Membership (Wellington, 1961).Google Scholar

91 PRO: T236/649O, various Washington to London telegrammes, May and Jun. 1961; and BoE: ‘IMF: New Zealand's quota’, 29 03. 1961Google Scholar; ‘Notes on New Zealand's IMF quota’, 17 04. 1961, 24 05 1961.Google Scholar

92 PRO: T236/6490, Cruickshank, to Morris, , 18 05 1961.Google Scholar

93 Wijewardane, , Official overseas borrowing, pp. 21–30.Google Scholar

94 Horsefield, and de Vries, , The IMF, 11, pp. 460–1.Google Scholar

95 Gifford, J. K., Wood, J. Vivian, Reitsma, A. J. and Lougheed, A. L., Australian Banking (St Lucia, 5th ed., 1966), p. 315.Google Scholar

96 Crick, W. F., ‘The framework of inter-relations’Google Scholar, in idem (ed.), Commonwealth Banking Systems (Oxford, 1965), pp. 51, 23.Google Scholar