Manawatu Evening Standard. THURSDAY, MARCH 28, 1929. REDUCTION OF INTEREST RATES.

Manawatu Standard, Volume XLIX, Issue 101, 28 March 1929, Page 6

Manawatu Evening Standard. THURSDAY, MARCH 28, 1929. REDUCTION OF INTEREST RATES.

The New Zealand public might do a great deal to help in the reduction of interest rates were they to accept the suggestion made by the chairman of Earclay’s Rank at the annual meeting of that institution held in London some little time ago. Mr Goodenough, in addressing the shareholders of the bank, pointed out that if each individual investor were to appropriate some definite annual sum out of such money as he might have available for investment in the purchase of British Government securities he would help to “raise the price of the securities in the market, and would therefore be particularly helpful to the Government in connection with funding and conversion operations* thus assisting to reduce the annual charge for interest on the national debt by assisting -the Government to float fresh loans on the finest terms.” The British Government will shortly be called upon to redeem, or renew, war bonds to the extent of some £2,000,090,000, and Mr Goodenough’s suggestion is consequently well timed, as he further points out that with new money, obtained under such conditions as he suggests, the Government would be placed in a better position “to reduce taxation, opportunities for which are otherwise extremely circumscribed.” The New Zealand banking returns show that large sums of money are available for investment purposes and the Government, with its big programme of public works . and the many, demands made upon it by applications for advances through the State Advances Office, is able to make use of all the moneys that can be offered to it within the Dominion. The Prime Minister, in reducing the rate of interest payable on Government bonds sold over the counter to the extent of even oneeighth per cent., has taken the first step in advance in reducing interest rates. It is not likely that Sir Joseph Ward will be able to make any further reduction for some time to come, but the security offered and the rate of interest payable are quite good, and should afford sufficient inducement to investors to place such moneys as they have available at the disposal of the Government which must, sooner or later, obtain further loans overseas if the money is not procurable within the Dominion itself. So far as the London lfiarket is concerned, it is not at

all likely that, with the big demands made upon it and the rates of interest prevailing, a New Zealand loan offered at the 4% per cent, rate, even at a bigger discount than before, would find much acceptance this year. Last year’s £5,000,000 loan and the £7,000,000 loan floated by Sir Joseph Ward ’ early in January have both cost the country over 5 per cent., and interest rates have necessarily to be paid on moneys sent into the Dominion whether they take the form of hard cash or machinery and goods, and the interest payable on these loan moneys has to be met year by year in London at the due dates. If New Zealanders only got into the habit of investing their surplus moneys in the purchase of New Zealand Government bonds all flotation expenses would be saved; the interest paid by the Government would remain in the country and would be available in stimulating trade and, to an extent, to further increase moneys available for investment purposes. Of the £10,953,954 paid during 1927-28, £5,892,633 had to be met in London, and there was a ‘ further charge of £1,368,470 in respect of the sinking fund. If those moneys had been payable within the Dominion itself the strain on the public purse would not have been nearly as great as it proved to be, and at least a portion of the money would have been available for investment purposes. The country is carrying a heavy load of debt, and must continue to do so for many years to come, with no immediate prospect of any reduction in taxation. With the Public Works policy, to which it is committed, the Government cannot take steps to do away with further borrowing, and its wisest and best policy would, -therefore, '* be to raise as much as possible of the money it requires within the Dominion, thus paving the way for remitting a portion at least of the excessive burden of taxation which still hampers the progress of the country.