RATE OF INTEREST

Otago Daily Times, Issue 23687, 20 December 1938, Page 12

RATE OF INTEREST

POSSIBILITY OF A RISE EFFECT ON MONEY MARKET POSITION OF CITY COUNCIL The possibility at action being taken in Wellington to raise the rate of interest which is at present fixed at 3£ per cent, was mentioned by Cr Taverner, chairman of the Finance Committee, at the meeting of the City Council last night. Speaking on recommendations from the Standing Committees of the council concerning the provision of funds for proposed works, Cr Taverner said there was at present a tendency on the part of the investing public to avoid City Corporation debentures, but he was sure that if the council were enabled to offer a slightly higher rate of interest than 3£ per cent, any amount of money would be readily available. A Limiting: Factor - The limiting factor in all these proposals is the low rate of interest which is laid down by the existing regulations," Cr Taverner said. " Debentures are not readily saleable at 3£ per cent.; in fact, at present they are hardly saleable at all. On the other hand, we are daily receiving expressions of opinion that if we were allowed to offer a higher rate the, debentures would be more readily taken up by our own citizens. "The gilt-edged market Is at present in an extremely favourable state so far as the supply of money is concerned," Cr Taverner added, " but the position is nevertheless as I have set out. I. have reason to believe that the controlling, authorities, in Wellington are giving serious consideration to 'the advisability of allowing the irate of interest to be raised. Until that has been done it does not seem that there is much chance of progress." Coming Loan Foil Cr Taverner said the same conditions applied to the proposed poll for two loans totalling £150,000 for works and waterworks. Unless the funds were available the council would be limited in its activities. So far as the present proposals were immediately concerned, it would be necessary to realist; that they could not go very far until an indication was given that the money would be available. Surprise Expressed " I am surprised to hear Cr Taverner suggest that the Government is considering the raising of the rate of interest," Cr McMillan said. "Now that the leaks have been stopped by exchange control, in a little while thw savings of the people will accumulate and there will be plenty of money for Government and local body loans." " There are definite indications that the money is here in our own city, and that it would be available of we were prepared to offer a slightly higher rate of interest," Cr Taverner replied. "The savings of the people generally have very little bearing on that position. It is to be hoped that we will get the money we want at 3| per cent., but our definite experience for some time past has been to the contrary."