CHEAP MONEY.

Taranaki Daily News, 25 July 1929, Page 10

CHEAP MONEY.

In his speech on the Address-in-Reply in the House on Tuesday evening, the Prime Minister acknowledged his inability to reduce the rate of interest on State advances to settlers and workers to 4J per cent. The reason he gave was that his hands were tied by the arrangement made in London by his predecessor not to go on the market for money for such purposes for two years. This statement was challenged by Mr. Stewart, who explained the circumstances, and showed that when the electorate had decided against the Reform Party, he had left the arrangements for loans and conversion to the new Government to deal with as it demeed advisable. This, of course, is what any honest Finance Minister would have done in similar cimcumstances. The fact is clear that when Sir Joseph reached office, he found that it was quite impossible for him to . borrow money at a rate permitting him re-lending it in the Dominion ,at 4J per cent., as he had promised during the election campaign. He should have known this from- a study of the London money market. But “cheap money” was good election propaganda, and unquestionably largely influenced the electorate. Possibly Sir Joseph never thought he would be called upon to make good his promise so early. No good can com© from blaming others for his failure to redeem his promise, or from confusing the issue by introducing irrelevancies. It would be better for the Prime Minister to frankly admit that he misjudged the financial situation, and therefore is not in a position to provide cheap money for State advances. Money has ah international value, arid it will flow towards the point where it can earn most, consistent, of course, with security and safety. New Zealand s credit stands high at Home, but no Finance Minister can raise money there under the market rate. 'Sir Joseph undoubtedly did well to raise the seven millions loan and effect the conversion of the old loan on such advantageous terms as he did, but this was due not to any particular Confidence in him, but to' confidence in the Dominion, and the same results would have been obtained by Mr. Downie- Stewart, or any other Minister of equal standing. There was no mystery about the previous Government having committed the country to certain arrangements with the London . money, market... None at all. The arrangements . were purely tentative and provisional, and. the .way was made perfectly clear for Sir Joseph to raise money on the best possible terms, and those terms, as he speedily found out, prevented him carrying out his policy- -to lend, the. money out at per cent.,-as he stated he could. Sir Joseph acknowledged during the debate that he had raised money for advances for settlers and workers in the Dominion, which was the reason, he said, for not reducing the rate to 4£ per cent. This again showed the Government, or anyone else, cannot borrow money below ' the ruling market rate, and to promise to do so is unwise.