Interest rates unlikely to decline

Press, 12 August 1980, Page 22

Interest rates unlikely to decline

PA Wellington Interest rates are unlikelv to drop significantly while inflation continues at around 18 per cent, according to the chairman of the Finance Houses’ Association (Mr J. D. Rose). Several finance companies had recently reduced rates, but “the permanence and the degree of this reduction will depend in a large part on ' the extent to which the

over-all rate of inflation" can be reduced,” he said last night.

Growth in total lending reflected the high level of inflation in the. economy,, although a feature of the expansion in 1979-80 was a change in direction of use, he said in a speech prepared for delivery to the association’s annual dinner. Loans and advances to fanning, fishing, and forestry rose 65 per cent, to around $9l million. Forestry alone received $2B million, more than double the figure for the previous year. But the efficient use of loan resources was ham-

pered by the Government’s requirement that 25 per cent of all borrowings be placed in Government Stock, Mr Rose said.

“This requirement is a negation of the move to free enterprise, competition, and the efficient use of resources.”.

The lower earning rate on Government Stock affected the over-all return on funds used, and led to increased borrowing costs. "I wonder if like the god Janus, the Government is not trying to face both ways at once, one face •in the direction of free enterprise, and the other in the direction of direct control.”