MORTGAGE CORPORATION

Otago Daily Times, Issue 22519, 13 March 1935, Page 8

MORTGAGE CORPORATION

AMENDMENT TO BILL DIVIDEND ON SHARES FIXED AT 4* PER CENT. (From Oub Parliamentary Reporter.) WELLINGTON, March 12. By an' amendment to the Mortgage Corporation Bill introduced by the Minister of Finance {Mr J. G. Coates) in the House of Representatives to-day the dividend to be paid on corporation shares has been fixed at H per cent. The dividend was previously limited to 4 per cent., or 1 per cent, above the bond rate. The Minister explained that his amendment had been framed to meet the demands made in the House when the Bill was previously in committee. The amendment was criticised by Labour members on the ground that the Government was not justified in guaranteeing returns to investors when it refused to guarantee mortgage rates and prices to the people. Mr Walter Nash (Hutt) said the Government could get all the money it required at 3 per cent., and that a substantial dividend to the shareholders was unnecessary. Government stock had changed hands only yesterday at £3 6s 6d per cent., and it was ridiculous to suppose that the Mortgage Corporation securities would be better than Government securities. Mr Coates said he could not see the relationship between the dividend and the rate of raising money. He emphasised that the corporation was not a moneymaking concern and that the 4J per cent, limit on dividends was fair if members were prepared to take a long view.

Mr W. J. Poison (Stratford) expressed the opinion that the Minister need have no fear of the capital not being taken up with the dividend rate at 4& per cent. Bather, lie thought, there would be an immediate rush for shares since the investors would be assured of a dividend of 43 per cent, in perpetuity. As long as they, had their shares they would be receiving 4J per cent, on their money. The borrowers would pay the piper because they were finding the guarantee against any loss by the corporation, and were also finding the dividends for the shareholders. Mr F. Langstone (Waimarino): It is easy to see in whose interests the Minister is working, and they are not the borrowers' interests. Mr Langstone expressed the opinion that the dividend rate,should be fixed at 4 per cent. Mr C. A. Wilkinson (,'Egmont) expressed the opinion that the Government would be able to get all the money it wanted at 4 per cent. Before the shareholders' could lose the whole country had to go down. The object of the session wag to devise means to help the farmer, and yet the Government was taking steps to increase the price of money. Mr Coates: Will you explain how this is increasing the price of money? Mr Wilkinson: Yes, four and a-half per cent..is above the market price. Anybody can borrow money at 4| per cent. Money to-day cannot find investment, and here we are stabilising the price of money at a very high rate. I hope the Minister will see his mistake. Mr A. M. Samuel (Thames) said the Government was trying to prevent interest rates going any lower than they were at present. Mr Coates: Will you just say how that can happen? Mr Samuel: Because this corporation, which is backed by productive wealth or the value of the State, is guaranteeing a return of 4J per cent, for an investment and not as a speculation. The amendment was carried on the voices.

The Minister also referred to his consent mentioned in a previous committee stage to the withdrawal of clause 11, which enabled the corporation to increase its capital by means_ of a shareholders' meeting. He explained that the corporation could now increase its capital only with the "consent of Parliament. LABOUR'S OPPOSITION ITS OBJECTIONS OUTLINED. (From Otjb Parliamentary Reporter.) WELLINGTON, March 12. Outlining objections to the Mortgage Corporation Bill during 1 his third reading speech in the House of Representatives to-night, the Leader of the Opposition (Mr M. J. Savage) said they had opposed it from the beginning because they were firmly convinced that it had been introduced by a wholly discredited Government in the dying hours of its existence to destroy the State lending institutions. Mr Savage said that Labour believed the Mortgage Corporation could not render any service that could not be rendered by the State Advances Department with better results to the whole of the people, including the borrowers. The State could complete any borrowing transactions more economically than any subordinate part of the State, and the State itself would be in the best position to carry on economic lending. Mr Savage outlined the efforts his party had made to prevent the introduction of private capital, into the corporation, to oppose the payment of dividends on shares, to prevent any increase in the corporation's . capital, and principally to keep full control of the corporation in the hands of the State. Labour had also urged the Governmept to extend the advantages of the legislation to urban as well as to rural securities, and had opposed the provision in the Bill givingthe Minister power to guarantee the ditterence between two-thirds and fqur-hiths in certain advances. Mr Savage referred to the present rate of exchange between the Dominion and outside countries. He said that under the present conditions of trade the high rate of exchange might play an important part in conserving overseas credits, and might be used as a temporary means of subsidising New Zealand exporters, but the high rate of exchange must limit British exports to New Zealand, and con«»ouently limit British imports from Jvew Zealand.' He said that such a rate must an added charge on the commercial life and public accounts of the Dominion. It would be fair to estimate the amount paid to date on account of the increased rate of exchange at approximately £22,000,000, and the Minister should not for"et this amount had to come from incomes already reduced by Acts of Parliament. , ..^ Mr 'Savage stated that commodity prices had been increased through the same policy. The alternative to raising the rate of exchange was guaranteed prices, definite trade agreements, and the allocation of overseas credits for the purposes of these agreements. The control of exchange by a = national bankinc system would enable the Government of New Zealand to make available to traders at par all overseas credits required to give effect to the Dominion's part in any trade agreement. Concludinc. Mr Savage said the fanner was entitled to the difference between the amount he received in the markets overseas and the amount it took to maintain the standard of living in sympathetic relationship with the aggregate of the Dominipn's production. Would the Minister deny him that? -Must the farmer be content to cany the economic loss which resulted from producing for export, which was the only means available to the whole of the people to meet their overseas obligations?