MONEY MARKET.

Hawera Star, Volume XLVIII, 20 June 1924, Page 6

MONEY MARKET.

LOCAL BODIES’ LOANS. Interesting comment on the money market was made by Mr. William Watson, at the annual meeting of the Bank of New Zealand this morning. He said:— Issues of loans by local bodies in New Zealand during the last twelve months have been, on an unusually heavy scale, the total amount approved by the Government being £6,093,493. Whilst admitting that in most instances the money raised is being used for the advantage of ratepayers, and often for works of a more or less pressing nature, it is to be regretted that such great expenditure is being incurred when the interest rates and'the cost of the relative works are so excessively high. It should never be forgotten that, as New Zealand is an exporting country, the capital expenditure of the Government and local bodies should be most carefully watched, for the burden of rates and taxes will become oppressive if values of our products fall. Expenditure at the present rate cannot be kept up for any long period, and when it eases off considerably the Dominion may be faced with the problem of unemployment. "With but few exceptions, local bodies have to pay 6 per cent, for their loan requirements; indeed, it is not easy for any but local bodies of the four chief centres in the Dominion to get the money at or below that rate. The heavy cost of transferring proceeds of loans from London has militated against borrowing in that market, but a recent improvement in monetary conditions there has enabled several issues to be made at a- net cost to the borrower of about oil P er cent. The issue locally of loans of local bodies has adversely affected the increase of fixed deposits with the banks, and, coupled with the competition of the Post Office Savings Bank and companies for deposits, the lending resources of the banks do not expand as it is desirable they should do. Several of the most important of the farmers’ cooperative trading organisaj tions have taken advantage of the legislation passed in 1922 to arrange with I their depositors and bond-holders for I a postponement over a period of years of payment of their relative indebtedness. There is little reason to doubt that those creditors will be paid in full, and, in the meantime, receive interest, whilst the postponement of payj meat of principal will enable to comI panies to give such of their debtors i who are unable to meet their liabilities | reasonable time to work out their own I salvation. | In the North Island money is now l rarely obtainable on mortgage at less i than 64 per cent. ‘ Conditions are ij easier in the South, where the ruling | rate for first-class mortgages is 6 per " cent. I The banks have been in a position I to meet the proper banking require- | ments of their customers, but much I business is offered which does not come within that category, and, consequently, has to bo refused. The Advances to Settlers Department of the Government has lent an exceedingly large amount during the year, the figures for 1924 (£6,205,686) being I £3,804,668 in excess of those for the previous year. There are many complaints that, in individual cases, the department is not lending a reasonable %mount. From what we know of the activities of the department it seems to us that only air adequate margin of safety is being insisted on. Apparently quite a large number of borrowers fail to recognise that land should he valued on the basis of what it c-an produce, and that a. mortgagee’s estimate of value is invariably and properly less than that of a vendor.