Cheaper Money

Evening Star, Issue 20846, 16 July 1931, Page 8

Cheaper Money

Interest Reduction of Half per cent. Premier’s Successful Negotiations Voluntary Arrangement with Finance Authorities

[Special to tee ‘ Stae.’] ■ WELLINGTON, July 16. Tho Prime Minister and Minister of Finance (tho Right Hon. G. W. Forbes) announced to-day that, as the result of comprehensive xxegotiations, a voluntary arrangement had been agreed upon by the various financial authorities in the dominion which will have the effect of cheapening tho price of money. The present rate of 51 per cent, for over tho counter sales of New Zealand Government inscribed stock or debentures will be reduced to 5 per cent, on August 1, 1931. In the meantime the same maturity date will be maintained —i.o., to September 1, 1937. A readjustment in respect to rural advances bonds is under consideration. As has already been announced, the State Advances Board will, in so far as its present mortgagors are concerned, grant sympathetic consideration to any cases of genuine hardship that may be brought under its notice where the circumstances warrant it. The board is also prepared to grant consideration, where possible, to extensions of the balance of tho term of tho loan, whereby the half-yearly payments due by its mortgagors will be made less burdensome. The Public Trustee, in order to secure unanimity, will reduce by 5 per cent, tho rate to bo paid for new deposits by way of investment agencies in tho common fund for a fixed term of years, and in addition will pass on the benefit accruing from such new deposits to his clients,

present deposit x-ates, and to pass on the benefit to borrowers. The Auckland Savings Bank has agreed to reduce deposit rates by one-quarter per cent, and lending rates by one-half per cent., the latter to apply not only to future but to current mortgages. It is proposed that these arrangements will operate on and after August 1, 1931, which will necessitate a slight amendment to section 23 of the Savings Banks Act, 1908, under which, in ordinary circumstances, three months’ notice in the ‘ Gazette ’ of an alteration in interest rates on deposits is required. A decision that rates of interest on all future deposits and on mortgages will be reduced by ono-half per cent, has been reached by the majority of the building societies throughout New Zealand, and it is confidently hoped that the rest will also agree to fall into line. Investment, mortgage, trustee, and deposit companies throughout the dominion have also been approached, and generally have agreed upon a one-half per cent, reduction for new deposits, and to give the benefit accruing therefrom to their clients. The Post Office Savings Bank rate of 4 per cent., which has not varied since 1920, will be reduced on August 1, 1931, to 35 per cent., being the rate which operated in 1914, and a rearrangement in respect to Post Office investment certificates is under consideration.

“ For obvious reasons,” , remarked the Prime Minister, “ it has not been practicable to get in touch with all tho various trading companies in the dominion which take deposits, but generally it is concluded from views expressed on the subject that these companies ■null welcome the arrangement, both in then* own, and in the public interest, and will co-operate in the general reduction in tho price of money.” Tho Prime Minister said that he was grateful to the financial authorities concerned for the amount of interest and co-operation which had been shown in the matter. It clearly illustrated, ho said, that those authorities were anxious to bring about a general reduction of internal costs, and so assist in the solution of the problem created by the general slump in the prices for our pi’oducts sold overseas. u Thus,” concluded the Prime Minister, “ the completion of an amicable arrangement amongst all concerned will, it is anticipated, lessen money costs for the future, and in many cases, whore other commitments do not prevent it, borrowers will receive the benefit in respect to current mortgages.”

Current issues of local body securities iu respect to unexhausted loan authorities will also bo reduced by i per cent. Section 28 of tho Local Bodies’ Loans Act,, 1926, which provides for a rate of interest on local bodies’ loans up to 5] per cent, will be amended to reduce the maximum rato to 5 per cent. Section 114 of the same Act provides that the Minister of Finance may consent to an increase of this rate, and such increase can bo authorised by Order in Council Negotiations iu progress in resnect to local body loans will, of course, be safeguarded. An announcement will bo made by tho Associated Banks in. New Zealand regarding deposit and overdraft rates. Tho banks have had the matter under consideration and have indicated that, provided tho rates paid by other institutions on deposits are satisfactorily reduced, the banks will reduce their rates on fixed deposits, and they will also make suitable adjustments in rates on advances. Similarly, tho Trustee Savings Banks at New Plymouth, Hokitika, Dunedin, and Invercargill have agreed to a one-half per cent, reduction on the