LOW PRICES

Evening Post, Issue 29, 4 February 1935, Page 13

LOW PRICES

ONLY ONE FACTOE

BORROWING. .AND SPENDING

The committee points out that low prices are only one factor in the present ;■ position-of' the'-farmers and contends if •':.; that.probably.the main reasonfor the — ;" plight of many .people in New Zealand today is ■ pver-borrowing and overspending, fit is hekLthat the Govern- ■. . meat's -remedy would not stabilise mortgage: interest rates at a low figure -r ahfl that there is still-a danger of poli,Ucal influences, being used on behalf rj * of; mortgagors.. f.■ .• : . "The Government's scheme for the ..'• ', •■reorganisation of mortgage finance 1 ; contains: two proposals, states the re- -'.■ i'jiort. First, it is proposed to establish .a.National Mortgage Corporation • -which will..alter the present system -'- ' of. rural and urban finance, and second, ? 'it"is proposed to rehabilitate farmers'1 c . .. i finance by readjusting-' present mort- --- ' :"gages tb^ne'w and, undecided, levels of 'land and- -produce values. The two * - 'proposals arc not inter-dependent and ■ should not be-confused. The commit- ■ ,tee is convinced that it is possible to :• ■■'■ -evolve "a scheme• for the final adjustment of existing mortgages without ~ . the proposed Mortgage Cor"- -- -.-.: iporation. ' . .-. ' "The scheme-has been presented by i^.v-Jthtf-MirlisteEiOf Finance in such a man- * >'"/J;{rSr-'.;as'.-<i'c> .suggest-: Hh.e twovproposalS :/-' -are interlocked. ...This is definitely' , not so." The Minister informed the ; : ...'. ;co'minittee " that two entirely separate "' ■"' Bills are to be presented to Parlia- .-'. '-merit, and the committee therefore -': ■ deals separately with the two proposals. '.'■.; :;■>.- ;.. "The committee urges that anyone' f ' ' the Minister's proposals should divorce the Mortgage Corporation'frqin aiiy scheme for the rehabilitation of farmers' finance, ■ "The committee" has had .the advantage of discussions with' the Minister ■*-!*- of Einance and>his staff, and its com- ?,' -'j^iea'tS are based.on -■'< the Minister's jj- pjamphlet.-bf November 30,.; 1934, and on the information which was afforded -'■■ ■ it;: at- r.the -interviews- it-had . with- the ;:-' ' Minister." ' -•'"•"' ''--■■ • .-':-. '■ ' ' NEED. FOR NEW INSTITUTION. ::■ : .-.."i. The1 committee believes, and has ,t urged on Mr. Coates, that there are >"-" . ■ no: producers.today who are efficient - ■-• and competent men, and who have sufficient, equity in their properties, who i cannot boriro.Wj, at very low rates of *■■■' interest, whatever money they can use >: . profitably in their businesses.

, • "Mr. Coates's pamphlet ■ advances as the. reason for the-present position of the' producers, the unparalleled drop in-the.^ world values of primary produce; So'far as-New. Zealand is con-.'cern^a,-this -is only half' the story. Admittedly 'lo\v y .prices are a factor. ; Probably the main reason' for the difficult position of many * people in New Zealand today is over-borrowing ...and pver-spendingr, not only by individuals,: but' by all classes of the community, including local bodies and the " Government. When, as a remedy for Ahis position, it is proposed to increase: facilities ,for 'borrowing, the ■ public must naturally be alarmed. The remedy would seem to be to restrict rather than, to expand borrowing. ,V f; ARGUMENTS'REFUTED. .. : '-'The following reasoris have been advanced as -justifying the-creation of a pew.,institution:—/ - i • ."(a) .The expectation that the Mortgage "Corporation, will result in" a . steady- flow of capital towards ".' primary industries at substantially.reduced rates of interest. ■. ' , ■; "(b) ; 'The new - institution will pro- . -vide for: the amalgama^on of the mortgage ■ lending activities of Governitfejri't^Departments. ■ • .""(c); The. of having some lender/able and willing to provide the .Jong-term.finance required to carry out the settlements contemplated by the rehabilitation legislation.

v" (&)..', The elimination of political pressure ,by State mortgagors.

.."With regard to these views, the ■'committee makes the following com■£Qents:rr~.\ .'.."'

",(a)vThe committee does not believe tfjat^the .Mortgage Corporation will b&Cabley permanently, -to stabilise mortgage. interest rates at a low figure. The; committee deals further with this matter later?in this memorandum.

, t"{W With certain qualifications mentioned below,, there is. much to be said in..favour of an.amalgamation of the Crown's mortgage lending' activities. In the past there have been cases of departments competing in. lending, the one with the other.

~"(c) The committee deals separately with the -rehabilitation proposals. In the view, the committee has taken there, will tie no necessity to create any new institution. If settlements are arranged between 'mortgagors and mortgagees on a sound basis there is today, in the opinion of the committee, and will continue-to be, ample facilities for the necessary refinancing. ";' ' ' -. ■

"(d) Undoubtedly alllcmpts are made: at the present time to bring political influence to bear on the Government, lending departments.l In the opinion 'of the committee the introduction, of a so-called independent board of. directors will not minimise improper political ■ pressure on the part of mortgagors. On the contrary, the

aggregation of mortgages into one channel .will.'. greatly .facilitate and accentuate political pressure from mortgagors. . ■