INTEREST-FREE LOANS

Greymouth Evening Star, 26 July 1945, Page 4

INTEREST-FREE LOANS

COUNTIES CONFERENCE DEBATE WELLINGTON, July 26. Interest free money for public amenities was discussed at the New Zealand Counties’ Association Conference at Wellington. The conference heard Mr. H. T. Gibson, Waitemata, County Council, whose local body put forward a remit on the matter, and Mr. Leslie Lefeaux, former Governor of the Reserve Bank of New Zealand. The Waitemata remit asked that the Minister of Finance be requested to fulfil the promises expressed and implied in the Government’s 1935 and subsequent policy by issuing all new credit money required for national purposes through the Reserve Bank, ■lnterest free, at its source, to make such credit money available in loans to local bodies at nominal interest rate for carrying out approved public amenities; to avoid inflation, the issue of such credit money to be correlated with the maintenance of a stable internal price level and assurance of fulltime employment. This recommendation was much in line with the recently enacted British local authorities bill, making money available by the Treasury to local authorities at approximately the same interest rate as the Treasury paid. A Mangonui remit recommended the Association should study the subject of interest-free money as a means of providing finance for work of national importance. Mr. Gibson said he belonged to no monetary reform association. He contended that-local body interest-bear-ing indebtedness had reached a stage where it must hamper all .future progress and development. An ever-in-creasing proportion of rates was required to meet interest, and the burden on ratepayers was one which should no longer be tolerated, and certainly not increased. With overdue maintenance to be overcome at greatly increased costs, more county councils were faced with large and probably unprecedented expenditure. Their competition on the money market would make investment money scarce and possibly dear. The Government could control the rate, but not compel lending, unless the rate were tempting. INFLATION DANGER. Mr. Lefeaux, who was present by invitation, said he was there to help the delegates clarify their views. His opinions were solely his own. There was no one in the world more free from affiliation or identification than himself. What Waitemata proposed was without a doubt possible, it was also possible to walk on one’s hands, but that was not necessarily the method of progress to be recommended. Safeguards which existed when the Reserve Bank was founded, no longer existed, and there was no limit to inflationary process which could be indulged in. It could be done but the consequences were inescapable, There would be an extension of trouble brought about by too free advances to the Government. The' rate of interest was not. really a material issue with capital ‘works for local bodies. The money should first be borrowed from the people as a whole. If they started to spend without doing this, they would increase the number of “pieces of paper” in the hands of the people, without increasing the volume of consumer goods. There would be more money, but a stationary amount of consumer goods. By borrowing from the people for capital purposes what went out was balanced by what came in from loans. The debate on the remits will continue to-day.