OPUNAKE POWER BOARD.

Taranaki Daily News, 13 December 1932, Page 12

OPUNAKE POWER BOARD.

(To the Editor.)

Si r —In your report of the Opunake Power Board of the 10th inst., when dealing with a matter regarding interest, I am reported to have stated “three and a-half per cent, at war-time is equal to 6 per cent, now.” This statement as reported is not only incorrect but is also misleading. What I actually said, or implied, is this. “Values to-day are roughly 100 per cent, higher than they were before the war; therefore if 3J per cent, was paid to-day in volume it would equal 6 to 7 per cent, before the war.’ Putting it in a concrete form, land sold at £lO per acre then is probably paying interest on £2O per acre to-day, with the selling value of produce lower. Therefore, assuming that there was 100 acres ip a farm at £lO per acre, or £lOOO principal, the interest at- 6 per cent, is £6O. At £2O per acre the price would be £2OOO, or at 6 per cent., £l2O. Without writing down the principal (as values are not stabilised) so that interest shall be compatible with the price of produce with pre-war as a basis, it is evident that 3 per cent, would produce £6O, so see that interest at half the rate todtjy is equivalent to the full;rate at prewar. If prices are to remain at present values, then it. is obvious that (1) either interest must drop 50 per cent, or to half its present rate, or (2) all principal must be written down to correspond with productive value (approximately 50 per cent.). To cite a tangible case, I could take the South Taranaki Power Board. In the arbitration proceedings it was disclosed that although £50,000 to £60,000 was the actual, cost to the Electric Light Company r (whose assets and reticulation, etc., the board was buying), yet on values at that time . the assets were valued at £140,000, or thereabouts., It is. therefore apparent that this original capital on the same basis of interest is only w°rih half of what it is assessed at. Or put it hi another form, the interest should or could drop without undue hardship to. a much lower rate. This matter is so wjde and so controversial that I will not speak further, excepting to say that I emphatically am of the opinion that high interest rates or overvaluations to-day are 75 per cent, of the cause of our troubles.—l am, etc.,

J. S. TOSLAND. Pihama, December 10, 1932.