Commercial General Finance not convinced by P.M.

Press, 9 May 1979, Page 24

Commercial General Finance not convinced by P.M.

PA Auckland The managing director of General Finance, Ltd (Mr F, V. Noble Beasley) expects business to slow down as the winter sets in, and doubts that interest rates will fall. In a speech prepared to mark the opening of the new General Finance office in Auckland, Mr Noble Beasley said, “the Prime Minister (Mr Muldoon) has tried tp persuade us that Government stock rates could come down in the next issue. “Do you believe, in the face of a short supply of money, and a pressing need, that the Government can reduce interest rates on Government stock, and get the money it needs?” he asked. “The Government can nominate any rate it likes, but I suggest two things: firstly, this fiscal year the deficit is again going to be about SISOOM, and the Government must borrow internally for a large portion of it; secondly, as Mr Muldoon says, he will tighten the money supply, and this always puts up interest rates,” said Mr Noble Beasley in an address read on his behalf. Mr Noble Beasley said that, whether the new Government interest rates were inflationary or not was a moot point. “Normally Government borrowing removes purchasing power, and slows down the rate of inflation. “However, if increased Government borrowing is used for welfare payments, and higher state employee benefits, and if the money is taken away from the equity, and commercial market (where it would finance production) the effect is in-

flationary. In this case, I be-: lieve we will see in-1 flationary effects.” Because Australia, Britain, and the United States are once again seeing inflation rates climb, New Zealand could expect an increase in inflation from both internal, and external, sources this year, he said. Elaborating on the effects of the higher Government interest rates on different types of people Mr Noble Beasley said: “If you are retired, and an investor, inflation will put your living costs up, but the higher interest rate finance companies will pay may compensate. “If you are a user of funds, the finance industry may have to charge two per

•Icent more to recover cost. If ■lyou are selling, and wish our industry to finance customers in the consumer' field, you may be squeezed i between increased demand, 1 higher outlays as inflation i affects your replacement , stock, and a shortage of > funds available from finance houses.” ; “The Government now, : not only makes finance comt panies put 20 per cent of : their funds in Government i securities, but it also tries • to compete for funds from ; the same depositor as fin- : ance companies try to at- ■ tract,” he remarked. Mr Noble Beasley was unable to attend the opening f in person, because he was I i detained in Wellington by | r bad weather.