“Middle Classes Biggest Hire-Purchase Users”

Press, Volume CI, Issue 29744, 10 February 1962, Page 13

“Middle Classes Biggest Hire-Purchase Users”

(New Zealand Press Association)

WELLINGTON, Feb. 9. The saying that hire purchase was the poor man’s overdraft was a misnomer, said Dr. N. Runcie, a 33-year-old world authority on the subject, in an address to the annual conference of the New Zealand Association of Economists today. Experience in post-war Australia and pre-war United States showed that it was people in the middle income group who were the most important users of hire purchase. The change of - social attitudes towards buying on

hire purchase was a potent influence in this. New Zealand’s outstanding hire purchase debt was probably a little more than £ 25,000,090. The figure was not known officially. Hire purchase terms were more conservative in New Zealand than in Australia, partly because of official controls and the excess demand on available funds of finance companies. Hire purchase debt in Australia expanded from £5 600,000 to £491,200,444 in 1960, and considerable expansion had also taken place in other Western countries.

This was due to rising standards of living, the increasing social acceptance of hire purchase, full employment or near full employment, social security and general economic expansion. It could be argued that hire purchase increased savings by increasing incentives Wives going out to work and the salutary effect on absenteeism and strikes were pertinent here, said Dr. Runcie. Hire purchase forced savings that would not occur in any other way and led to increased consumer choice. Consumer goods industries were subject to change and innovation and created a mass market and the economy of scale. In Australia a car could be bought on a 20 per cent, deposit and paid off over four to four and a half years against 66 2-3 per cent, deposit in New Zealand and 12 months’ payment period. Home appliance deposits were 10 to 15 per cent, and four to five years to pay in Australia and in New Zealand 5 to 10 per cent, deposit and 18 months to pay. Personal Loans Dr. Runcie said he would not be surprised to see some Australian banks starting a personal loan department in spite of bank investment in finance companies. Dr. Runcie would like to see an instalment credit commissioner set up to administer the legislation of hire purchase. This would avoid having the central bank's attention directed to credit control in certain industries. If capital issues control were lifted in New Zealand it could lead to a new flow of overseas capital and possibly Australian companies coming in to dominate the scene. The last 12 months in Australia indicated that the hire purchase system could aggravate a depression phase.