EXCHANGE RATES

Dominion, Volume 24, Issue 104, 27 January 1931, Page 11

EXCHANGE RATES

Interest on Loans

PAYABLE WHERE? Lower Hutt Problem A problem in foreign exchanges was set members of the Lower Hutt Borough Council at its meeting last night. The question was brought before councillors by a letter from an Australian insurance society stating that it was now prepared to consider an application from the Lower Hutt Council for the payment of interest in Wellington until further notice. The interest in ordinary circumstances is payable in Melbourne.

It was made clear by the society that it was not prepared to enter into any permanent agreement, but wished to retain the right to cancel the arrangement and revert to the payment in Melbourne if considered advisable at any future time. At Par Only. The Mayor (Sir Alexander Roberts) explained that the rate of exchange with Australia was £l6/5/- in New Zealand’s favour, but the banks would not remit the money except at par. That meant to say if the announced rates held the payment of £B6/15/- to <the bank here would result in the company in Australia receiving £lOO. The bank insists on receiving the full £lOO here before it will remit to Australia. The amount of interest involved is £3406 annually, and if the exchange rate could be availed of that would mean a saving to the council of over £6OO if the interest were paid in - Australia. Several councillors maintained that the society’s proposal would be too onesided, and they urged that it be not complied with. “It is the intention of the society to retain these funds in New Zealand for investment,” said the Mayor. “If wo remit to Australia, even at a premium, it will be money lost to New Zealand and used in Australia.” “It is a great benefit to the society to have the money in New Zealand, said a councillor, “and I think we should get a premium on the money here.” A committee comprising the Mayor, Councillor Mitchell and Councillor Campbell was ■ set up to go into the matter with the society and.the bank.An Earlier Agreement. Following hard on this discussion was a notice of motion by Councillor Campbell to have a resolution agreeing to pay interest on loans due to another insurance society paid in Wellington instead of Sydney rescinded. The interest involved in this case was £4lOO a year. Councillor Campbell said be thought the council had-acted rather hastily in agreeing to the society’s proposal. Had he personally made such an agreement he would, whatever the cost to himself, abide by the consequences. That they were trustees of thfe public he thought made a difference. The Mayor stated that the council had made the agreement, which it was in honour bound to carry out. If the council, rescinded it the consequences might be far-reaching. In the event of the council wanting to borrow further moneys from the society it might not get a warm reception if it went back on its word. So far as be was concerned he did not advise the council to accept the proposal without having gone carefully into the matter. He thought at the time that the exchange rate was stable.

The Mayor forcibly repudiated a suggestion that the society in making the proposal was guilty of sharp practice. “The society,” he declared, “was as ignorant of the future position as wc were.” The notice of motion was withdrawn, and the committee mentioned above is to meet representatives of the society to see if some arrangement cannot be come to.