LOANS TO LOCAL BODIES.

Sun (Christchurch), Volume VII, Issue 2027, 13 August 1920, Page 6

LOANS TO LOCAL BODIES.

SUGGESTION TO GOVERNMENT* PRIME MINISTER PROFFERS ADVICE. [From Oar Own Parliamentary Reporter.] WELLINGTON, August 12. To-day the Hon. J. A. Hanan (Invercargill) asked the Rt. Hon. W. F. Massey (Minister of Finance) if he had considered the probable effect on the money market in New Zealand in the way of increasing the rates of interest by so many local bodies raising loans for works in their districts. These were competing with one another, and out-bid-ding one another. Mr Hanan asked if the Government could not do something in the direction of raising a loan of its own, and then lending out to local bodies at a uniform rate of interest. That would have the effect of providing local bodies with cheaper money than at present, would relieve the Government of competition on the money market, ami would tend, to some extent, to reduce the rate of interest. Mr Massey said that he was sorry that he could not sav off-hand how much money the Government had lent to local bodies this financial year, but it was a verv large sum—and then he did not think that they had supplied one-fifth of the money ! required by the local bodies. There was hardly a local body in the Do|minion which was not raising a loan, and, as they were coming into competition with one another, the tendency was to raise the rate of interest. He thought that the local bodies were unwise, because, in the present shortage of labour and material, they were not getting value for their money. It would, in his opinion, be very much better to wait quietly until material became more plentiful than at present. The Government was doing all it could to keep the rate of interest down. Replying later to Mr W. A. Veitch (Wanganui), Mr Massev said that the Government, after full and mature consideration, had come to the conclusion that local bodies should not be allowed to borrow at a higher rate than would return 5} per cent to the lender. He knew that 10 per cent, was being offered at Home in some cases, and he was afraid that might have nn effect here. However, there was, fortunately, enough money in the Dominion for internal requirements—but whether people would keep it here was a different thing.