CHEAP CREDIT

Dominion, Volume 28, Issue 58, 1 December 1934, Page 8

CHEAP CREDIT

Bank Chairman on Low

Interest Rates

“During the past year continuous efforts have been (made in many countries, and in particular the British Dominions, to implement the policy of cheap ‘credit,” said Mr. Thomas Buckland, president of the Bank of New South Wales, at the annual meeting in Sydney, yesterday. (“Such a policy is by no means of necessity inflationary in its effects, for low Interest rates at the present time (are a reflection of the abnormal conditions of supply and demand which have for some time prevailed in the capital market. I “It is desirable that there should be no slakening in the zeal witli which this policy (is put into effect and many respectable authorities are agreed that interest rates have not yet reached their lowest level. At the same time, it is (clear that cheap credit by Itself is not enough. Favourable circumstances ar e necessary to induce people to make use of the opportunities which are offered (to them and anyone who believes that abundant supplies of cheap money will by themselves place our economy upon an even keel is doomed to (disappointment. “People who have been accustomed to the high interest rates which prevailed immediately before the depression are naturally -a little disturbed when they find it impossible to secure an outlet for their savings at the old customary rate, but (the community as a whole has no good reason for regret if the 'normal’ rate of interest settles at a level (much lower than we have known for some years. The sooner the situation is realised, the more quickly will be our recovery from (the depression, for the tendency to withhold savings from effective investment will gradually cease to (be important.

“Australia and New Zealand have had much experience of tlie evils of extravagant borrowing, and in the 'ordinary course of events, when tlie necessity for the rapid development of virgin country no longer (exists, it is inevitable that we should come more and more to rely upon the savings of our own people ‘for our capital requirements. But even here it is possible that the reaction against past extravagance may be carried too (far. It Is highly desirable that caution should constantly be shown in borrowing, but if in any community caution (is pushed so far that there is no borrowing, it will at the same time follow that (there is no advantage to be derived from saving. It is nil to (tlie good that an adequate volume of saving should be maintained lint it is highly important that no obstacle should (be raised which would unduly delay the conversion of saving into productive equipment.”