Mr Lake Defends Govt. Trading, Financial Policy

Press, Volume CI, Issue 29760, 1 March 1962, Page 14

Mr Lake Defends Govt. Trading, Financial Policy

( N.Z. Press Association)

WELLINGTON, February 28.

“The allegation that the present Government has urged the bankers to make a charge on overdrafts which will hit the smallest borrower is completely without foundation,” said the Minister of Finance (Mr Lake) tonight in a statement issued in reply to a statement by Mr A. H. Nordmeyer, M.P. for Island Bay, during a speech at Fairlie this week.

“It is true a small service charge on overdrafts was introduced last year, but this was done by the trading banks themselves to help meet increased costs. It was not a matter for the Government,” said Mr Lake. “As far as overdrafts generally are concerned, trading banks had approval to charge interest at an average rate of 5i per cent, on overdrafts during the three years Mr Nordmeyer was Minister of Finance and the position is still the same,” said Mr Lake.

On the subject of bank lending, Mr Nordmeyer was in error when he claimed that the Labour Government’s massive borrowing from the Reserve Bank in 1960 had no effect on the balance of the economyTotal Government indebtedness to the Reserve Bank increased by £25.9 million tn the Labour Government’s last year of office, said Mr Lake. “This was not a seasonal movement. It was an outright addition to the purchasing power which increased inflationary pressures at a time when trading conditions were deteriorating and there was obviously a need for restraint,” said Mr Lake. There could be no doubt that membership of the International Monetary Fund

and World Bank was in the best interests of New Zealand, said Mr Lake. Mr Nordmeyer continued to urge that New Zealand should borrow only on the open market overseas, even though it was generally known that it was difficult to obtain such loans and that they were much more costly. The effective rate of interest of the last London loan raised by New Zealand was in excess of 6 per cent. Recent long term loans from the World Bank had been at 5% per cent., while a threeyear drawing from the International Monetary Fund would cost New Zealand only 1.3 per cent, per annum on £22 4 million. “Industrial development under the National Gove, nment is being carried out in accordance with two simple principles which were not observed by the previous

administration,” said Mr Lake.

“In the first place, the interests of the consumer are being protected. Secondly, the public is being informed of agreements which have been made- Publication of previously secret agreements can hardly be construed as misrepresentation, as Mr Nordmeyer claims.

"The claim that it was the policy of the National Government to extend overseas markets by bringing in goods from cheap labour countries is equally naive,” said Mr Lake. “In fact, practically all present trade with Asian countries is being carried on under agreements which were in force while the Labour Government was in office.”

The only new agreement with an Asian country was that with Malaya, which came into force last year.