THE CONVERSION LOAN.

Press, Volume LXIX, Issue 20806, 16 March 1933, Page 6

THE CONVERSION LOAN.

♦ HOPES FOR ERA OF CHEAP MONEY. OFFERS NOW COVER £34,642,672.

ITHE TRESS Special Service.] WELLINGTON. March 15. When the Minister for Finance (the lit. Hon. J. G. C'oates) introduced the Government's con vers ion proposals into the House of Representatives, he made it plain that although the annual saving of £570,000 would be of considerable assist aim. to the State, the first and primary object of the scheme not so much to relieve the budget as to secure a reduction in th« general level of interest rates, and thus to ease one of the principal burdens under which the industries ol the Dominion have been languishing. Although the scheme is still uncompleted, there are already signs on the stock market flint the Government's interest reduction, accompanied by the reduction in short-term rates that is to be made by the banks, will before lotic have a markedly boiielicuil effect by initiating a new era of cheap money and so lessening working costs, which are embarrassing almost all forms of business to-day. The rale pu.vable on gilt-edged Government securities has always been the standard rate of interest in New Zealand. In the opinion of the Government, when these gilt-edged securities arts reduced to a -1 per cent, basis money that is at present lying idle will be forced out into higher yielding industrial stocks. When tho conversion scheme is out of the way it should thus be possible to float debenture issues en a lower basis than many firms have had to p:iv at any time since the war. The Government contends, therefore, that the fixation of a standard of 4 per cent, interest will not only ease the load that, has been piled on to many firms and undertakings faced with fallin,;; profits and fixed int/oest rates, but will ensure that when the tide of depussion turns and recovery fully begins industry will not be hampered bv a reluctant investing public. An Economist's Opinion. In an article which appeared in the "Economic Journal," following the introduction of the British conversion scheme, the distinguished economist. Mr John Mayruud Keynes, declared: "A reduction of the long-term rate of interest, to a low level is probably the most necessary of all measures if wc are to escape from the slump and secure a lasting revival of enterprise." This is precisely the measure which the Government has taken in New Zealand, and it is expected to bring about the same valuable results, although naturally on a smaller scale, as the great British conversion. By to-night the half-way mark of the conversion had been reached, for the Minister was able to announce that the applications and promises to convert now covered £:;4.(>42,072, of a total debt of £09.514,000 that is in the hands of the public. It is anticipated that the conversion of a portion of the debt that is held bv State Departments, another £45,800,000, -will b c announced within the next few days.