FREEHOLD SECURITIES.

New Zealand Herald, Volume LX, Issue 18468, 3 August 1923, Page 8

FREEHOLD SECURITIES.

; The official statement issued by the New Zealand board of the Aus- j tralian Mutual Provident Society regarding its attitude, toward investments on mortgages of . land confirms the earlier announcement by j the general "manager that in the j meantime the society is not lending money to; farmers, ..■' Several rea-1 sons are given for this position, which the society evidently regards as open to criticism and therefore I not : easily .defended. The chief point is that for various reasons the i fund available for investment has been j curtailed, ;; and I the: balance has j been earmarked for some months to iCiome ; for; advances to local-i authorities. The extracts from correlspondence two years ago with ; the principal ; board in Sydney are interesting. % The New r Zealand board was urged to disregard the higher returns fram tax-free Government securities and to encourage mortgage' investment and then directed' to ; decline ; applications by local authorities so that funds might be available for loans on mortgages. That portion of : the reply from the New Zealand board now quoted may not be. a completely convincing case for. adopting ; the contrary policy, but the information given appar-, ently satisfied the Sydney ' board. Probably the most significant sentence; in that letter is., the statement that many applicants for mortgages asked for amounts that "were apparently largely' in excess of the advances ■ justifiable under, j: present j conditions" —and that was two years j ago when conditions were ' not,: so ! favourable as they are to-day. Thus j as long ago•;as September, 1921, 'the I New Zealand aboard" decided that -land values were too uncertain to permit loans on -mortgage,v and ; it turned its funds into; local; bodies' debentures; as offering a reasonable I return with a minimum of risk. It i does not yet propose any change ; in its policy, which, so ,i ar as * freehold ; securities are concerned, is limited to the renewal of ,loan& as they mature.;;; But- even ; _.■an■;■ institution actuated by such motives as are expressed in the Sydney board's letters must be gravely concerned j when it meets such'an experience' 'as. that r described 'in the letter - to the Prime "Minister regarding the effect of the graduated land tax. Attention has already been directed, to the fact that the privileged treatment of income from local body debentures is a serious discrimination against investments on mortgages, and a- most disturbing endorsement of the view now expressed that "a loan to a local body . . . gives a much; greater benefit to the community generally than a loan ; to an individual i farmer. That proposition is not only essentially, but should be . manifestly, unsound. I What purpose would .be served by I an electricity undertaking • if there [were no farmers to purchase the • current, by ft bridge if there were, no

farm produce for it to carry, and where would the farmers !be if freehold securities were refused by all investors so '■> that they, might make loans to local authorities? Not only is theire discrimination in respect of income tax, but as the A.M.P. Society has found, an institution which in bad times has to take over securities owing to the failure of farmers to whom it has made loans, is immediately subject to punitive levies under the graduated land tax. There was never any intention that the system should have this /effect, and it is remarkable that no suggestion has ■ been made by the Government to prevent such injurious consequences. , The position has now been placed before members of Parliament, and it is to be hoped that they will devote serious attention to the;problems it involves. Various forces are already working toward the stabilisation of land values that is of fundamental importance in the view of the large lending institutions. The associated questions, of taxation demand immediate examination by Parliament.