Government’s policy on interest rates criticised

Press, Volume CXII, Issue 32976, 24 July 1972, Page 14

Government’s policy on interest rates criticised

A statement by the Minister of Finance (Mr Muldoon) that he had “deliberately opted for a low interest policy” would rate a horse laugh even in the rarified atmosphere of the Treasury, said the Leader of the Opposition (Mr Kirk) in a statement last evening.

It was reported in "The Press’* on Saturday that Mr Muldoon had told the Finance Houses Association that the Government was not prepared to see New Zealand’s interest-rate structure continue to increase on a percentage basis regardless of economic conditions.

"Ever since Mr Muldoon has been Minister of Finance, interest rates have risen steadily,” said Mr Kirk. "The present level of private first mortgage is as high as it has ever been in the history of New Zealand. Last year, in spite of Mr Muldoon’s claims of opting for a low interestrate policy, interest rate on money advanced by the State Advances Corporation to farmers was increased. In the last six month, the Government Life Insurance Office has sent out hundreds of notices to people who are paying off mortgages, advising that the interest rates on those mortgages will be increased.”

Average interest rates had been substantially increased, Mr Kirk said. A lot of such increase in interest was the direct result of policies followed by the Government which required insurance companies and others to divert money from house mortgage into Government stock. “Far from opting for a low interest-rate policy, the Government—Mr Muldoon included—has ignored the rapid rise in interest rates for industrial development and other purposes,” said Mi Kirk. “When the Government restrained the income of wage and salary earners, retailers, and people in similar occupations by way of stabilisation regulations, the Government flatly refused to apply restraints on interest.”

There was still no restrain! on interest, said Mr Kirk, and this increased cost continued to mount. “Rising interest rates are a tax on production,” he said. "They hurt the small company with inadequate reserves much more than they do the huge overseas-oivned corporation. High interest rates put up housing costs and the cost of capital work for local bodies. “New Zealand needs lower interest rates but it has not had them, nor is it likely to get them, under a National Government which boasts of unrestrained private enterprise and promotes an increasing control over the financial affairs of New Zealand by overseas banks and financial interests,” Mr Kirk said.