Sequel to ratios may be slow

Press, 7 February 1985, Page 9

Sequel to ratios may be slow

PA Wellington The investment manager of A.M.P., New Zealand’s biggest institutional investor, Mr Paul Randall, said the full effect of the Government decision to abolish the reserve asset ratio system might not be felt until later next year, through to 1987.

“Then the Government will not have to borrow quite so much, because the deficit will be down, and stock rates will not have to be so attractive.

“At the moment, they are so attractive, there is virtually no competition from anybody else. Industrial debentures are virtually

non-existent, and finance company debentures are relatively short-term.” The ratio system had tended to be used as a “big stick” over the institutions by previous Governments. Financiers would welcome the freedom to choose how they invested their funds, even though the present investment pattern would change slowly.

The change would have a minimal effect on life offices, but was likely to mean a gradual increase in lending ability for finance companies, and for savings banks which had long expressed a wish to lend more.