Investment Curbs

Press, Issue 32333, 26 June 1970, Page 1

Investment Curbs

(Parliamentary Reporter)

WELLINGTON, June 25. To restrain private sector spending the Minister introduced controls over investment organisations.

A Government stock ratio requirement will be introduced for building societies. They will be obliged to hold a minimum percentage of their deposit liabilities in the form of Government securities. Initially this will be 12} per cent. The Minister said that societies with holdings of Government stock insufficient to meet the new requirement could be granted up to five years to buy the necessary amount.

Private superannuation funds will have to maintain a percentage of assets in Government and local authority securities to qualify for income tax exemption. Initially the over-all ratio will be 30 per cent. Existing schemes may be allowed up to five years to make adjustments to their assets. Finance companies will have to invest 12.5 per cent of their borrowings in Government securities instead of the present 10 per cent. Life insurance companies, [which now invest 30 per cent i of their new investable funds in public securities—22.s per cent in Government stock and 7.5 per cent in local authority stock—will be asked to invest another 5 per cent of their new funds in public securities for a year from October 1. Fire and general insurance companies will also be asked to invest a larger proportion of their funds in public securities. The Minister said it was considered desirable that of their new investable funds for the year from October 1, s2m should be put into Government and local body stock. Trading banks had been set restrictive targets for advances to the non-export sec-

tor, he said, and to help to ensure that these were not exceeded, the penal borrowing rate from the Reserve Bank had already been increased from 7 per cent to 84 per cent. Loan Interest Local bodies have been granted an increase in their interest rate on loans. The top rate is now 6 per cent, instead of 5J per cent. STATE BORROWING.—On Government borrowing, Mr Muldoon said conversion of a loan of $32.5m maturing on July 15 would be invited and a cash loan would be opened on July 1.