OVERSEAS INTEREST

Taranaki Daily News, 31 January 1933, Page 8

OVERSEAS INTEREST

LOCAL BODIES’ BURDEN NEED FOR SOME RELIEF. “MR. COATES’ OMISSION.” Auckland, Jan. 30. While appreciating the Rt. Hon. J. G. Coates’ remarks in Parliament regarding the need for a lowering of interest rates on local body securities, the chairmen of two of the largest Auckland local authorities pointed out on Saturday that the statement was not only vague, but gave no hirit of any proposals for easing local bodies’ overseas debt charges, which had been made particularly burdensome by high exchange. “It is imperative that interest reductions should be made,” said Mr. J. A. C. Allum, chairman of the Auckland Transport Board. “The difficulty is that the statement made by Mr. Coates does not throw any real light on the position. “The major part of local body expenditure at present consists of interest charges. It is for these, perhaps more than the maintenance of existing services, that the ratepayer has to find money. Wages and the cost of supplies have come down, but unless interest! charges are reduced in sympathy, the relief provided is totally inadequate. The reduction by means of stamp duty last year was only of slight assistance, because the position had been made more serious by an exchange rate of 10 per cent, on London. Now that the exchange rate is up to 25 per cent, there is an urgent call for action. A LONDON CONVERSION? “If Mr. Coates’ suggested reductions in interest are to apply only to loans domiciled in New Zealand, very little relief will be afforded, and then only to the smaller local bodies which have been able to borrow on the local market. The larger bodies have had to go overseas for their loans, and they now find themselves saddled with an additional burden at a time when all revenue is falling. “The Transport Board normally pays £BO,OOO annually in interest on overseas loans, and the higher exchange has raised the figure to £lOO,OOO. Only if there is a reduction in overseas interest rates is there any hope in Mr. Coates’ somewhat nebulous proposals.” “Mr. Coates’ statement does not seem to bear’ any reference to that part of local body indebtedness on which it is ipost necessary that there should be an interest reduction —I mean the overseas debt,” said the chairman of the Auckland Electric Power Board, Mr. W. J. Holdsworth. “I have always been under the impression that the visit of Mr. Downie Stewart and Mr. Park to London was made chiefly for the purpose of seeing what could be done toward the conversion of existing loans at a lower rate. It is well known that Mr. Bruce is making a long stay in London on Australia’s behalf with that purpose in view, and that he is aiming at a rate of 3J per cent. After the huge conversion last year, investors in Britain realise that rates of-interest on public securities cannot be maintained at the old level, and it is not too much to suppose that the present is a fairly good time for Dominion governments to make a move for concessions. STATE ACTION UNAVOIDABLE. “A good deal of New Zealand local bodies’ debt in London is at rates that are too high under present conditions—much of it is at 5 and up to 6 per cent. Conversion, of course, would be impossible except through a general movement on the Government’s part, and it seems to me that the Government would make the process a good deal easier if it could see some way of placing the guarantee of the whole Dominion behind the responsible local bodies which would be seeking to convert their oversea securities. “If such a movement could be set on foot, the reduction of rates on the debt held in New Zealand would be made

very much easier,” added Mr. Holdsworth. Reference to the latest Official Year Book shows that local bodies’ debt at the end of the financial year 1930-31 was domiciled as follows: In New Zealand, £39,584,652, or 60 per cent.; in the United Kingdom, £17,533,652, or 27 per cent.; in Australia, £8,574,529, or 13 per cent., making a total of £65,692,606, on whicn the annual interest charge was £3,536,510. Interest rates ranged from under 4 per cent, to a maximum of 7 per cent., the average being 5.38 per cent. For the debt held in New Zealand the average rate was slightly higher than in the case of holdings in the other two countries, the United. Kingdom being the lowest of the three. The figures relate to the amount of debt outstanding, and are not adjusted to the prices at which the various loans were raised.