DEBT SAVINGS.

Auckland Star, Volume LXV, Issue 106, 7 May 1934, Page 5

DEBT SAVINGS.

LOCAL BODY INTEREST

EFFECT OF REDUCTION.

INTERNAL BORROWERS GAIN.

An official statement covering , the interest on local body debts shows that the total interest charges have been reduced from £3,770,159 to £3,328,087 as a result of the statutory reduction of 20 per cent made last year. The 1933 legislation, of course, applied only to internal loans, and left untouched the interest, amounting to £880,772, on debt domiciled in the T?nited Kingdom, and the sum of £307,312 payable annually to debenture holders in Australia. The statement shows that the interest on the internal debt fell from £2,359,793 to £1,922,057 in consequence of the interest reduction scheme, and it is pointed out that further savings will accrue through the adoption of conversion schemes which have been undertaken by many local bodies. Under the Government's scheme a minimum rate of 4J per cent was adopted for local body eecurities, and under the new scale of rates the average interest appears to be in the vicinity of 41 per cent, whereas formerly it wa& 1 per cent higher. Prior to the statutory reduction, the interest payable by local bodies on internal debt ranged up to U per cent but this maximum has been brought down to slightly below 5J per cent. The interest on the external debt, however, continues to be at 5 per cent or over for all but a small sum. The statement makes no reference to the effect of the high exchange upon overseas interest payments, but this must be taken into account in arriving at the net benefit to taxpayers as a result of last year's changes. The exchange on the payments to British debenture holders at 25 per cent premium, amounts to j£220,000 & .year.