DEBT SAVINGS

Otago Daily Times, Issue 22259, 11 May 1934, Page 9

DEBT SAVINGS

LOCAL BODY INTEREST

EFFECT OF REDUCTION.

An official statement covering; the interest on local body, debts shows that the total interest charges have been reduce-i from £3,776,159 to f 3,328,087 as a result of the statutory reduction of 20 per cent, made last year. The 1933 legislation, of course, applied only/ to internal loans, and left untouched the interest, amounting to £880,772, on debt! domiciled; in the United Kingdom, and the sum of £307,312 payable annually to debenture holders in Australia. , v - \ ;'..' The statement shows that the interest on the internal debt fell from £2,859,793 to £1,922,657 in consequence of the interest reduction scheme, and.it is pointed out that further savings will , accrue through the adaption • of conversion schemes, which have been undertaken: by many, local bodies. Under the-Govern-ment's scheme a - minimum rate .of 4} per cent, was adopted, for Ideal bo-.lv securities, and tinder the new scale of rates the average interest, appears, to-1:e in the- vicinity of. 4J per: cent;, ■whereas formerly it was 1 per cent, higher. ■..'<;/• Prior to tie statutory '■■•'reduction., the interest payable by local bodies 'on. internal debt ranged up to 62; per cent., but this maximum has been brought down to slightly below 5$ per cent.- ,Thi> interest on the external debt, however, continues to be at 5 per. cent. or. over for all but a small sum, ;. The statement makes no reference to the effect of the high exchange-upon overseas interest payments, •; but this must be taken into account in arriving at the net benefit to taxpayers as a result of last year's changes. The exchange on the payments to British debenture holders at 25 per cent, premium amounts to £220,000 a year. : . '