INTEREST RATES.

Auckland Star, Volume LXV, Issue 150, 27 June 1934, Page 6

INTEREST RATES.

The anomalies in the interest world are ' thrown into sharp relief by news items this week. While the Wellington City Council has raised money at 3 % per cent (a small loan, it is true), the Auckland Transport Board has to pay between 5 and 6 per cent (plus exchange) on its London loans. The burden this imposes is heavy and well-nigh intolerable, and the position is made more exasperating by the fact that the world is overflowing with cheap money. Loans could easily be raised here or in London to pay off the Board's liability, but contract rights stand in the way. Other New Zealand local bodies are in the same position, and the irony of it is that it is the strongest bodies that are so tied to London. If there is to be' a movement to obtain relief, it should be a national one; representations to London to obtain a voluntary conversion would carry much more weight if they were made jointly. The situation may have far-reaching effects on future borrowing. New Zealand (and the other Dominions) will be less inclined to borrow on long terms from the Mother Country, save on very low rates of interest, and a movement will gather force to modify the terms of borrowing by making some provision for revision of interest rates in terms of money values. It must be borne in mind that the present system operates two ways. Deflation has put money into the pockets of lenders who lent some time ago at a high rate. A rise in prices and interest rates would hurt those who are now lending money cheaply. It is argued that over a long period these fluctuations balance each other, but the process is painful to the individual and disturbing to the community, and attempts i will be made to evolve a more equitable system.