REDUCTION OF INTEREST.

New Zealand Herald, Volume LXIX, Issue 21131, 14 March 1932, Page 8

REDUCTION OF INTEREST.

A reduction of interest rates, beginning with the internal State debt, is a device much canvassed in these days of Government embarrassment and commercial depression. It, found direct favour with the Economic Committee, and though there was considerable diversity of opinion in the National Expenditure Commission on the point, it also found a. place in the deliberations of that body. There is, according to reports from Wellington, a very decided belief that the Government has a measure in hand embodying some form of reduction. Before the country embarks on a course which, however glossed with euphemistic terms, involves a definite breach of contract, there should be a clear appreciation of what it involves. It is true Australia has done much the same thing as is being advocated here. Australia began with a " voluntary " conversion, but the voluntary character did not last long. Beyond that the people were told definitely that, the alternative was default. Can that be said fairly of New Zealand? Is the position so desperate in this country? Besides, if examples are wanted, it is not sufficient to go no further than Australia. A greater country than the Commonwealth, Great Britain, faced enormous difficulties, grappled resolutely with them, and is now hopeful of both a balanced Budget and a move up the road to recovery, without having attempted anything of this kind. It is, in fact, a plan to be adopted only under pressure of the most extreme necessity. Its consequences are certain to persist. If " gilt-edged " securities no longer deserve that name the flow of money to them will be definitely checked. The high reputation New Zealand has always deservedly maintained on the London money market will be gone and loans, when we want them and need them, will not be so easily or so cheaply floated. There will always be the feeling that what has happened once can happen again. The ultimate effects cannot be foreseen. So, leaving aside for the moment the question of the Government breaking a, contract solemnly made, the country should ponder very seriously the practical consequences of the course, if adopted.