INTEREST RATES

Poverty Bay Herald, Volume LXVI, Issue 19898, 28 March 1939, Page 8

INTEREST RATES

TREND IN AUSTRALIA POLICY OF CHEAP MONEY INVESTMENT & INDUSTRY, While the failure of the recent Commonwealth loan of £8,500,000 was disturbing, it would be a mistake to regard it as presaging a serious rise in interest rates, stated the Victorian Chamber of Manufacturers in reviewing the Australian bond market. The policy of cheap money has been so strongly adhered to by the central bank in recent years that it is unlikely it will be lightly abandoned.

The bond market has been supported for some time by Government purchases, which have had the effect of keeping interest rates low. In addition, operations on account of the Government have helped to maintain cash reserves of trading banks, and so preserve liquidity of the Australian banking position at a time when strain has been only too apparent. From the point of view of the investment market as a whole, the stability which has been preserved during 1938 and the early part of 1939, is in some measure due to maintenance of interest rates at a comparatively stableHeyel: Turnover in‘investment markets stiff 'remains very low.

With export prices now only 12 per cent above their 1932 low point, with deteriorating Government finances, and with continued political tension overseas, it is only to be expected that investors generally prefer to adopt a cautious attitude. An improvement in industrial recovery in the United States in the spring would do much to stop the downward movement in the export price index.