PRICE OF MONEY

Evening Post, Volume CXXIX, Issue 49, 26 August 1940, Page 10

PRICE OF MONEY

NOW LOW ENOUGH

THE AUSTRALIAN MARKET

"Evening Post," August 26.

The standard rate of interest in Australia at 3£ per cent., the rate at which the last war loan was raised, in the opinion of bankers, is now low enough. Official opinion in some auarters in Canberra, however, is that for the purposes of Australia's war economy, interest rates must be forced down gradually. This opinion was submitted by the "Sydney Morning Herald" to a number of bankers and other financial experts in the city. There appeared to be general agreement that to reduce rates below the 3£ per cent, for war loans "might endanger the whole Australian financial structure." One banker stated that reduction of the interest rates could only end m penalising the thrifty members of the community. . Interest on fixed deposits and savings bank deposits would have to fall to almost nominal levels in sympathy with any such move by the Government. If people who had been in the habit of saving were taught by hard experience that they would profit nothing by their saving there would inevitably be a discouragement of national traits, which it was the business of any Government to develop, ■whether in peace or war. "A breaking-point exists in these matters," he added. "To try to get interest down further will bring the breaking-point dangerously near. Subscribers, big or small, to war loans cannot afford to continue their subscriptions if the return is to be so low that they will be without income to meet commitments which they cannot avoid." , _ Saving in interest by the Government now, it was claimed, would be of small benefit compared to the terrific dislocation that would be caused to Australian life generally if the Government peddled loans to an unwilling market and embarked on the courses of action necessary,to force all available money into such loans. Industry in general and the man on the land would not benefit appreciably by a reduction of rates, another banker said. Insurance interests, which made heavy subscriptions to war loans, would suffer because they had to be assured of satisfactory returns from their invested capital. The Commonwealth Government, it was suggested, would be wise to realise that moves for cheap money in the London market, which had extraorr^Mary resources with which to meet extraordinary needs, could not be emulated in Australia, where there were grave restrictions on the total amount of money available. %. A large investor held that the success of the 3£ per cent, war loan should not mislead the Government. The loan had been attractive as a gatriotic, not as a business, proposion. If attempts were made to raise further loans at lower rates they might succeed only at unfair expense to elements vital to the national economy.