INTEREST RATE ADJUSTMENT

Press, Volume XCII, Issue 27764, 15 September 1955, Page 6

INTEREST RATE ADJUSTMENT

Relation To Living Costs Suggested

INCREASE IN TIME OF PROSPERITY '‘Governor interest” -would maintain steady prices and give New Zealand economic stability, said Herbert Lorralne Pickering, a farmer, of Scargill, in evidence to the Royal Commission on Monetary Affairs in Christchurch yesterday. **** we can relate available money directly with the cost of living, we can maintain steady prices and secure our standards of living,” he said. “We can control inflation and deflation by adjusting rates of interest to move up or down with the cost of living. Unlike today’s fixed rates, governor interest varies if necessary at six-monthly or even three-monthly intervals.” Under governor interest, in times of prosperity tending to inflation, rising rates of interest would induce borrowers to pay off capital, he said. That would withdraw surplus money from circulation, thus equating money and goods and lowering prices. Rising rates would discourage borrowing. Prices would not be driven up, and inflation would be avoided. In times of slight recession there would _be lower rates of interest, Mr Pickering said. More money would be left in circulation, and borrowing would be encouraged. Governor interest would assist any sound business providing a service to the community, Mr Pickering said. It was likely to be a serious disadvantage to financial entrepeneurs and gamblers on the Stock Exchange. “Unless we reform our orthodox economics, they will continue to fail in solving pur problems, which will drive a bewildered people to the alternative of socialism,” Mr Pickering said. “Governor interest is a means of retaining our present traditional system of free private enterprise.” Mr Pickering said he did not agree with a suggestion that the Government had set up the commission to discredit monetary reformers, and especially social credit ideas. “I believe Mr Holland wishes to obtain from this inquiry information which will help in forming a sound and positive financial policy,” he said. The commission concluded its Christchurch hearing yesterday afternoon. It will resume in Wellington on Monday.