INTEREST RATE REDUCTION

Taranaki Daily News, 19 September 1931, Page 4

INTEREST RATE REDUCTION

PRIME MINISTER’S REPLY. OBJECTIONS TO PROPOSAL. The Taranaki Power Board yesterday received a reply from the Prime Minister to their suggestion that Parliament should effect a compulsory reduction in the rates of interest on all internal loans. Mr. Forbes stated: “This is a matter that calls for very careful consideration. There are a number of objections to such a proposal, the most important being that a compulsory reduction in rates of interest would undermine the confidence of investors and probably result in a transfer of . capital from the Dominion. This would create a shortage in the funds available for investment, and increase the demands made on the Government for loans on mortgage. Furthermore, a compulsory reduction of this nature might reasonably bo considered as an unjustifiable interference with existing contracts, arid would to a certain extent discourage saving. It is realised that many persons would save, irrespective of the rate of interest, but on the other hand there .is a large body of prospective investors to whom a reduction in interest rates, would result in a more than proportionate decrease in the amount saved and invested. Your representations in this connection, however, are being kept in view.” Acknowledgements of the board’s resolution were aleo received from the Hon. R. Masters and the Hon. S. G. Smith. In acknowledging the receipt of the board’s resolution regarding a lower rate of interest on loans the Publie Trustee replied “that the funds invested in the advances to your board are trust funds and the public trustee is charged witn the duty of obtaining for those beneficially entitled to the funds the full rate of interest payable in terms of the debentures. It is regretted, therefore, that it is not possible to accede to any reduction being made in the rate of interest. I am, of course, quite prepared to discuss with your committee general matters in relation to the loans.” Air. Moss considered that the best thing was not to discuss the matter pending the report of the Parliamentary Economic Committee. The people would be very disappointed if something was not done to afford them relief. Air. Marchant: They will be more than disappointed. They will be very nearly bankrupt.