New type of Govt bond

Press, 1 June 1984, Page 1

New type of Govt bond

PA Wellington A new Government security bond, to be called “Our New Zealand Bond,” would be available from Tuesday, June 5, said the Prime Minister yesterday. Sir Robert Muldoon said that the bond was part of the Government’s borrowing programme and would give New Zealanders an opportunity to earn a guaranteed sum plus a cost-of-living adjustment. The main terms of the bond are that it will have an interest rate of 5 per cent a year plus a cost-of-living adjustment paid quarterly. The full amount of the interest would be liable for income tax, Sir Robert said. There would be no fixed maturity date although the Minister of Finance may repay, on a month’s notice, at any time five years or more after the date of the investment. The bonds would be redeemable six months after purchase on seven working days notice. Each application for the bonds would have to be for a minimum of $lOO with mul-

tiples of $5O thereafter. Commission would be paid at the rate of 75c a $lOO of bonds registered. The Government’s eighth stock tender, seeking $250 million, was announced by the Reserve Bank yesterday. The tender seeks $5O million ordinary stock at 8 per cent and $2OO million in indexed stock. The last tender sought $6OO million and was filled, although Sir Robert said the interest rates were too high. It was put to tender at 8 per cent and offers accepted ranged between 8 and 10 per cent. The Our New Zealand Bond would precipitate a credit squeeze, said Labour’s finance spokesman, Mr Roger Douglas, yesterday. Mr Douglas also said that inflation-proof bonds were a better investment than O.N.Z. bonds, with the “crazy tax system” whittling away an apparent high real rate of return. He described the Government announcement of the bond as the most graphic admission of failure yet.

Mr Douglas said that the Government was trying to hide the true rate of interest being paid. “By next year the Government will be paying between 13 per cent and 15 per cent, far higher than the 11 per cent which a lender receiving interest on a first mortgage is supposed to receive,” he said. Only at low inflation rates and for investors on marginal tax rates of 31.5 c in the dollar was the O.N.Z. slightly better than infla-tion-proof bonds, Mr Douglas said. Two fresh moves were made yesterday in line with the Government’s battle to lower interest rates. About 500 personal firstmortgage loan holders will have interest rates lowered from 12 to 10 per cent by the Post Office Savings Bank. The A.N.Z. Banking Group, Ltd, said it would drop interest on bank cards from 18 to 15 per cent. The Postmaster-General, Mr Talbot, announced that the lower rates would apply to loans secured by a first mortgage over real estate, and which were advanced before August 4, 1983. People with freehold property have used it to secure the loans. The move brings the rates into line with others charged by the P. 0.5.8. and follows Government policy to reduce interest charges. A.N.Z. said its new rate for cardholders would apply from June 8.