HELPING THE FARMER.

Otago Witness, Issue 3875, 19 June 1928, Page 20

HELPING THE FARMER.

RURAL INTERMEDIATE CREDITS.

GREATER ELASTICITY ADVOCATED.

Several aspects of rural finance were discussed by Sir George Elliot (chairman of directors of the Bank of New Zealand) in his speech at the annual nrweing of shareholders On Friday. Dealing with the Rural Intermediate Credit scheme Sir George said, inter alia:- — Last session Parliament passed a measure empowering the establishment of a Rural Intermediate Credit Board for the purpose of making loans to farmers on the security of farm produce and live stock. The measure is a well-meaning attempt to meet the financial necessities of farmers who have not sufficient satisfactory security to enable them to borrowthrough the ordinary channels. The Government is lending the board £500,060 free of interest for 10 years, and it is also extending other cadi privileges. The success of the scheme will depend largely on the terms on which the board can raise its bond issues. The bonds will be a first charge upon the moneys from time to time lent by the Government to the board as mentioned, and the assets upon which loans are made. These will comprise the only securities available to bond holders. Any scheme that will help the farming industry is most worthy of support; it is, therefore, to be hoped that the public, and particularly farmers who are in a position to do so, will assist the movement by taking up these bonds as they are issued. It has been reported, however, that the board’s intention is to lend its funds only upon such securities as the ordinary prudent business man would accept; but if this intention has been correctly reported and is carried out in practice, it will be found that loans will be granted only to persons and associations who could quite easily obtain assistance elsewhere at little above the charge made by the Intermediate Credit Board. A difference of even 1 per cent, would not be sufficient to pay the income tax, apart altogether from other rates or taxes' that private lenders are subject to. My colleagues and I are strongly of opinion that it would be in the interests or the Dominion if the board altered such intention, took wider risks, and charged a higher rate of interest on account of those risks. Borrowers whose security is not of high order have the greatest difficulty in raising money at any price, and these are the people who stand most in need of assistance at the present time. Whether the rate of interest charged is > 6 or 8 per cent, is not of vital importance—what is of importance is that these borrowers should be assisted to the greatest extent possible and given a chance to win through, even though their security may not be of a choice nature, provided, of course, their character and ability are satisfactory. Lenders who are prepared "to take a reasonable risk, even if they-charge a somewhat high rate of interest for the risk involved, do more for the advancement of New Zealand than those who confine themselves to gilt-edged business at a low rate of interest. If there is any necessity for a Government Rural Intermediate Credit Department—and I think there is—that .necessity lie* in the direction of help for the struggling settler. Such help can be given only by the Government, and not by the stock and station agents, financial corporations, and private lenders who, having to pay high rates and taxes, cannot afford to take the risk involved in this class of business without charging a very high rate of interest. The percentage of losses in this class of business would be certain to be above the average; but if a rate of interest were charged sufficient to cover the extra risk involved, it is conceivable that a great and valuable work would be accomplished, not only for many a struggling settler, but for New Zealand gene-

rally. I may say the Bank of New Zealand will gladly render every assistance to the Intermediate Credit Board that lies in its power, financial or otherwise. It has been suggested that the Government should consider the advisability of exempting from income tax all revenue derived from mortgages on farm lands and advances against the security of farm stock and produce. If it ia. considered advisable in the interest of the industry that the Rural Credit and Rural Intermediate Credit Boards should have special advantages in regard to taxation on income from such advances, surely all lenders on this class of security should be put on the same footing. If such a course were followed it would mean,, of course, that the loss of revenue from one section of taxpayers would require to be made up by the others. Nevertheless, the suggestion is worthy of careful consideration.

The New Zealand Government, as lessor of Crown lands, has done much to meet the misfortune of its tenants by concessions of rent, etc., but whether enough has yet been done in this way is a matter of speculation. A number of cases have come under our notice in which the allowances made seem inadequate, but these, no doubt, will receive further consideration from the department. This bank also, in common with many other lenders on farm land, has made considerable concessions on advances by reductions of both principal and interest. There is no doubt that much Crown land thrown open for settlement during the last 20 years should have been left in its virgin state, and that the rental of other areas, particularly bush land, has been fixed at too high a level. No settler is so .much entitled to consideration as he who sets out to bring virgin land into productiveness, and few taxpayers will complain of a maximum of consideration being extended to him by the State, either by- reduction of rent or by loans through the Rural Intermediate Credit Board. Fortunately the great majority of New Zealand farmers are not impecunious. As a matter of fact, it is doubtful if even 10 per cent, of them are in that condition at the present moment. Many, especially those who acquired their farms before the war. are now doing, and have been doing all along, particularly well.