Govt accused of acting improperly

Press, 18 March 1983, Page 10

Govt accused of acting improperly

PA Wellington The Finance Houses Association said yesterday that it was "improper” for the Government to set its interest rates at any level it chooses while preventing through regulation the private sector competing on the open market. Commenting on the Government's new Kiwi savings stock, Mr M. J. Wells, the association's chairman, said in a statement the Government had adopted an aggressive stance in its attempt to soak up funds and to finance its large deficit. “Although we agree with the aim of the Government in this action, we question the extent to which it is prepared to go. “It is quite improper for the Government to set its interest rates to any level it wishes, arbitrarily, but constrain the private sector competing in the open market by the imposition of

regulations. “The FHA does not accept that there should be and code of behaviour for government and another for the private sector.”

Mr Wells said that effectively the Government moves would stop the downward trend in interest rates, a trend initiated by the finance houses as far back as December.

“This implies that interest rates are not set by inflation alone, but by the forces of supply and demand in the market. It seems that the objective of the Government to get interest rates down has been relegated in its list of priorities.

“This new issue will make it more difficult for the private sector to gain those medium term funds so essential to the economic development of New Zealand while regulations constrain effective competition in the market.”