CHEAPER MONEY.

Press, Volume LXV, Issue 19613, 8 May 1929, Page 10

CHEAPER MONEY.

A DISTURBED MARKET.

POOR PROSPECTS AT PRESENT.

Speaking at New Plymouth on Monday, the Prime Minister (Sir Joseph Ward) said he hoped before long the interest rate would be reduced to 5 per cent, and later to 4J par cent. Whether Sir Joseph has been unduly optimistic or not, perhaps time alone will teli, but not all of those qualified to sum up the potentialities of the money market just now agree with him that such an eventuality is even within the bounds of possibility. For instance, one noted authority whose opinion carries a great deal of weight in Christehureh, reviewing the situation yesterday, said that while the American money market w.'is in the disturbed condition of to-day, it was ver\ difficult to see how cheap money could bo borrowed outside of Xew Zealand. It was a fact that the Bank of England had been accumulating gold recently, I)u*~ it appeared that only in J:he dim and distant future would the New Zealand Government be able to borrow money in England and lend it out to our settlers at per cent, interest. Money was very plentiful in New Zealand" just now," and it was a fact that investors were finding it difficult to discover s.\fe and remunerative investments. It must be remembered, however, that so long as income tax absorbed 20 to 25 per cent, of ths incomes of companies and individuals paying the maximum rate —and it was the big people who lent the big money —there was only a little over 4J per cent, left with interest at 6 per cent. For these reasons it wah not anticipated that mortgage money would be available from private sources at leas than 5$ per cent, for some time.

At present 5J per cent, could be ob< tained for Australian Government securities, and the New Zealand Government was still paying 5 l-Btb per c«nt. for monies raised in the Dominion.

Everybody would welcome the suggestion that 4| per cent, money would be available to settlers, and it was to be hoped that, with an easing of income tax in New Zealand, investors conld also lend their money at a lower rate. "But recently we were advised that taxation would be increased, rather than decreased," concluded the authority.

"A Great Opportunity." "No doubt che.aper money would not only be welcomed by the people on the land, but it would be very valuable to them at the present time, because most of the things they buy are rather dear, and as the cost of money is one of their primary working expenses, lower interest rates would undoubtedly reduce their overhead, which is what they need." This was the comment of Mr W. Machin on Sir Joseph W.aTd's statement. "I do not know whether the banks are contemplating a reduction in interest rates. This also would be a useful thing, not only to the farmer, but to the commercial community, and it looks as if the hesitancy to use more money, which is very marked at the present time, may anise the price of money to go lower in many directions." Probably, however, it was not altogether the cost of money which was causing this hesitancy. The situation was very curious just now. There was an abnormally large amount of money .available in New Zealand which was not being used. He thought this hesitancy in using it to embark on business enterprise was due to a state of uncertainty in the minds of thoM who could use it. They did not know what kind of legislation the Dominion was going to get in the future, whether the Labour laws might not be tightened tip still further against the employer (to the ultimate disadvantage of the worker), or whether there was to be more official interference with business in future or less. "Personally," said Mr Machin, "I should say that if we eould get money a little cheaper, and if we could get more confidence that our enterprises would be fairly treated by the powers that be, now is the great opportunity for this Dominion to spend some of its surplus wisely in productive enterprises. If this could be done, probably nothing else could be devised which would make such a big improvement in the unemployment situation."