ROOT OF TROUBLE

Evening Star, Issue 21945, 4 February 1935, Page 7

ROOT OF TROUBLE

OVER-BORROWING—OVER-SPENDING MONEY AVAILABLE FOR PROFITABLE USE I The committee believes (the statement commences), and has urged on Mr Coates, that there are no producers to-day who are efficient and competent men, and who have sufficient equity in their properties, who cannot borrow, 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 concerned, this is only half the story.

Admittedly low prices are a factor. Probably the main reason for the difficult position of many people in New Zealand to-day is over-borrowing and over-spending, not only by individuals, but by all classes of the community, including local bodies and the Government. When, as a remedy for this 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.

The following reasons have been advanced as justifying the creation of a new institution:—

(a) The expectation that the Mortgage Corporation will result in a steady flow of capital toward primary industries at substantially reduced rates of interest.

(b) The new institution will provide for the amalgamation of the mortgage lending activities of Government departments. (c) The necessity of having some lender able and willing to provide the long-term finance required to carry out the settlements contemplated by the rehabilitation legislation. (d) The elimination of political pressure by State mortgagors.

With regard to theso views the committee makes the following comments:—

(a) The committee does not believe that the Mortgage .Corporation will be able permanently to stabilise mortgage interest rates at a low figure. Tho committee deals further with this matter later in this memorandum.

tbj 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, tho one with the other. fc) Tho committee deals separately with the rehabilitation proposals. In the view the committee has taken there will be no necessity to create any new institution. If settlements are arranged between mortgagors and mortgagees on a sound basis there are today, in the opinion of the committee, and will continue to be, ample facilities for tho necessary refinancing. (d) Undoubtedly attempts are made at the present time to bring political influence to bear on the Government lending departments. 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.