LOWER INTEREST RATES.

Press, Volume LXIX, Issue 20817, 29 March 1933, Page 8

LOWER INTEREST RATES.

A GENERAL REDUCTION. THE GOVERNMENT'S POLICY. [THE PBESS Special Service.] WELLINGTON, March 28. On the eve of his departure for the north, the Minister for Finance (the Rt. Hon. J. G. Coates) referred to the steps now being taken to give effect to the Government's policy of bringing about an allround reduction in interest rates. He said that the outstanding success of the conversion operations had disposed of the matter in so far as Government securities were concerned, and local body securities were also covered by the legislation passed last session. The intention of the banks to reduce overdraft rates for best accounts to 5 per cent, had already been announced, and this reduction would be made as from May 1. It now remained for the Government to take action to give effect to the balance of the interest reduction programme as previously outlined in the House. "Accordingly steps are now being taken to reduce the Post Office Savings Bank rate to 3 per cent, as from April 1," said Mr Coates. "The present rate is 3f per cent, on deposits up to £SOO, and 3 J per cent, on deposits above that amount, up to the limit of £2OOO. From April 1, however, all deposits will bear interest at 3 per cent. Trustee Savings Banks. "Concurrently with the reduction in the Post Office Savings Bank rate, an Order-in-Council is being issued reducing the rate fojj the trustee savings banks to the same level, 3 per cent., as from April 1 next. The trustee savings bank rate is at present on the same level as the Post Office, so this Order-in-Council does no more than preserve the existing relative position. "In reducing the rates for savings banks," said Mr Coates, "the Government must in equity take steps to see that they do not suffer as a result of such action. Accordingly it is necessary to make a further reduction in the maximum rates of interest that may be paid by building societies and investment companies. Otherwise funds would tend to flow from the savings banks to these institutions. It is realised, however, that building societies and investment companies are affected by the mortgagors' relief legislation, and it is not desired to increase their difficulties. Accordingly the reduction now being made will apply to new deposits only. That is to say all renewals of deposits at present held by these institutions may be effected at rates within the maxima fixed by the existing Orders-in-Council. For new deposits, however, the maximum rates that may be paid have been lowered by 4 per cent. Accordingly under the Order-in-Council now being issued the maximum rates for new moneys will be as follows: —Call, 2i per cent.; three months, 3 per cent.; six months, 3J per cent.; 12 months, 3£ per cent.; two years and over, 4 per cent. These new rates will operate as from April 1. The rates are £ per cent, above the deposit rates of the banks, which it will be remembered were reduced in December last. Local Bodies. "Up to the present no Order-in-Council has been issued limiting the rates of interest that may be paid by local bodies for "deposits. In fairness to other institutions action is now being taken in this direction, and as from April 1 next local bodies for the respective periods concerned will be restricted to rates of interest not exceeding those prescribed for new moneys accepted by building societies and investment companies. That is to say, in so far as new moneys are concerned local bodies and investment companies are placed on the same level, but as local authorities cannot accept deposits for any period in excess of a year, the maximum rate that may be paid by any such authority is 3i per cent., the same as is fixed for building societies and investment companies for periods of from six to 12 months. "Finally," added Mr Coates, "steps have been taken to reduce the rate of interest that may be paid by the Public Trustee on investments in his common fund. This rate, which is at present 4 per cent., is being reduced to 3£ per cent, as from April 1 next. At the same time the maximum rate that may be paid by him on moneys hereafter accepted by him under investment agencies has also been limited to 3J per cent. In respect of investments already held under such agencies, a further 5 per cent, reduction in the amount of the interest payable is being made, with a minimum of 4 per cent. The necessary Orders-in-Council, etc., are being issued to-day in a special Gazette."