Short Of Loan Money

Southland Times, Issue 23773, 22 March 1939, Page 4

Short Of Loan Money

ITHE Invercargill City Council J is the latest authority to find itself in difficulties through the Government’s refusal to sanction a higher rate of interest than 3| per cent, for local body loans. In 1938 the council was fortunate enough to obtain the money required for the first year of its works programme, £55,000, from the Invercargill Savings Bank. Now, however, the bank has intimated that it does not wish to take up any further part of the loan, and inquiries of other lending institutions have so far brought no response. Application has been made to the State Advances Corporation which, the Minister of Finance has announced, will provide loan money at 3| per cent, where local bodies are unable to borrow privately; but it may be doubted whether funds from this source are as readily available as they were. The Mayoi’ and town clerk leave today for Wellington in an effort to obtain the money required, £62,500, before men employed by the council under Scheme 13 have to be put off. The problem the council is facing has worried many local bodies in recent months. Loan money at 3| pei’ cent, was difficult to obtain a year ago, and the difficulty has increased as the long-term interest rate has moved upwards. When Government stocks are returning from 4| to 4| per cent., local body issues for similar periods at the limit of 3| per cent, imposed by the Government through the Loans Board are not likely to be successful. Moreover, as the Government has itself been drawing heavily on the State lending departments it is unlikely that these sources will be available to local bodies much longer, if, indeed, they are available today. The situation will not be improved until the Government accepts the inevitable and permits the interest rate to rise in conformity with trends which are world-wide.