INTERNAL LOAN

Evening Post, Volume CXXVII, Issue 92, 20 April 1939, Page 10

INTERNAL LOAN

SHOULD BE RAISED

SAVING NECESSARY NOW

GOVERNMENT yiEW

Urging that saving was necessary now, just as spending was necessary; previously to offset the effects of the depression, the Minister of Finance (the Hon. Walter Nash), speaking at the Easter conference of the Labour Party on the question of the internal credit situation, stated quite definitely that the Government was of the opinion that an internal loan should be raised. It had never had any other opinion. Any difference of opinion there may, have been was exclusively confined tat the time of issue of the loan, rate o* interest, and the issue price, reports the "Standard." A rate of interest ot dh per cent, had been suggested. lai determining what the rate was to be one would have to have regard to thai market rate of interest on similar securities. At the present time the rate varied from about 4£ per cent, ta 4& per cent. Other circumstances were the effect of a low rate of interest on investments, particularly the investment of trustee funds. These were securities which trustees were legally authorised to invest in and to which they were confined for their investments. " On the other hand, the effect of a high rate had to be construed in its relationship to rates on other types of lending. For example, if the rate on the best type of security, namely Government Bonds, was raised, then there always was the tendency for the rates on local body,borrowing, on mortgages and overdraft, to respond. A further consideration; which they had to take into account was whether in view of this they< should refrain from issuing the loaa and take the money from the THe4 serve Bank. "The Government believes that it it right to use the Reserve Bank to thai point at which it will expand production to the full and at the same tima maintain and improve living standards. But to use it beyond that point nullifies the work the Government has been endeavouring to do in the past; that is, to repeat the words used, to maintain and improve living standards. ASSISTANCE FROM BANK. "Already the country has had some assistance from Reserve Bank credit. There has been the Dairy Industry, Account, where there exists an overdraft. However, this is mainly a straightforward business transaction, and does not materially affect o»r position. There has, however, been used several million pounds to build houses. Some other moneys have been used for public works. The point is, can we go on using Reserve Bank funds at a stage when we are not producing all the consumers' goods necessary to meet the position which would be created by the additional expenditure from the Reserve Bank?" The position up to date could be read in the Reserve Bank return, the latest of which showed the following position:— £ Advances to the Primary Products Marketing Department 7,497,177, Advances to the Stafe for other purposes 11,975,009 "Three or four years ago when failure of purchasing power was causing and accentuating depression; the^ advice to spend freely was an essential policy to maintain living stancterds," Mr. Nash declared. "An; increase in the purchases of consumes goods was more important than saving. "Now the position is different. A, saving from people's actual income id necessary to counteract a possible! danger of prices rising and as a basis for capital expansion. It is unnecessary to stint or curtail demands for food or necessities, but to the extent that the demand for other goods is restrained prices will be more stable. For saving now, that is, withholding: expenditure now to enable our people to enjoy more in the future and to avoid price increases now, there is an unanswerable case. "That is, we in New Zealand hay» to finance our own development. Ex«i panding industry in New Zealand depends on the people of New Zealand and the people of New Zealand have to provide the capital for the building up of New Zealand. And in doing this we must keep production up. In. the last two years factory production has increased 25 per cent., but in the last year the increase was only 7£ per cent. —whereas the total production in value decreased last year by half a point. Farm production was down in volume.

"From every angle, then, production, in New Zealand must be increased* whether it is farm production or factory production or production of services."