The Auckland Star: WITH WHICH ABB INCORPORATED The Evning News, Morning News. The Echo and The Sun THURSDAY, NOVEMBER 3, 1932. INTEREST RATES.

Auckland Star, Volume LXIII, Issue 261, 3 November 1932, Page 6

The Auckland Star: WITH WHICH ABB INCORPORATED The Evning News, Morning News. The Echo and The Sun

THURSDAY, NOVEMBER 3, 1932. INTEREST RATES.

.For <Ae cause that lacks assistance, For the wrong that needs -resistance, For the future in the distance, And the good that we can do.

New Zealand has now the unenviable distinction of maintaining interest rates at a higher level than any other important unit of the Empire. Of this fact the Government's decision to issue bonds at 5 per cent is the latest evidence, and investors within the Dominion are being oifered securities on terms which are indeed tempting when comparisons are made with the yield on new issues in Australia, Canada or South Africa. These five per cents, it must be noted, are not subject to stamp duty. Britain gave a lead some months ago in a riovement to encourage borrowing, and it was predicted at Home that the big conversion scheme and the smaller ones which have followed would cause a fall of interest overseas. This has been actually happening in the other three Dominions, and loans for longer terms than the New Zealand issue have been raised at rates of interest well below 5 per cent. Australia's experience is, perhaps, the most surprising, because it shows a remarkable recovery from the depths reached last year. New Zealand did not have to contend with the same difficulties as the Commonwealth, and yet within this short space of time the Australian Government is able to float an internal loan of £8,000,000 for ten years at an effective rate of £3 16/ per cent.

The rate of interest which the Government is offering is almost one-half per cent above the average paid on the Dominion's public debt, but this is only part of the story, for with prices and incomes at the present low level a rate of 5 per cent is to-day a far greater burden than it was a few years ago. Nothing could indicate more plainly the rigidity which exists, and the failure to adjust interest charges to general economic conditions. This is a barrier to recovery, and it should be recognised in the Dominion that a reduction of the rate of interest on long-term investments is one of the most necessary of all measures to encourage enterprise. While the State continues to pay high rates, all private borrowers are handicapped, and money is diverted to the Treasury which should be used to help trade and industry. Further, taxation is kept up to pay the bondholders, and the Government is adding to the difficulties which it will have to overcome to ease the burden on the taxpayer. It should begin to pave the way now for a reduction in taxation as soon as conditions permit, and for this reason there should be an attack on long-term interest rates. Mr. Keynes, in commenting on the importance of a fall in interest rates in all countries, stated in the September issue of the "Economic Journal" that the conversion operations in Britain would have a double benefit. They would relieve the burden of the National Debt, and would have far-reaching effects on long-term rates of interest generally. If, however, these benefits are to be obtained, it is for individual governments to make efforts at internal readjustment along the lines trodden by the British Treasury.