INTEREST RATE RAISED.

Timaru Herald, Volume CXXV, Issue 18467, 8 January 1930, Page 7

INTEREST RATE RAISED.

ON GOVERNMENT DEBENTURES. HARDENING OF MONEY MARKET. By Telegraph—Press Association. WELLINGTON, January 7. The Minister of Finance (the Rt. Hon. Sir Joseph Ward) announced to-day that, as from to-morrow, 9th instant, the present issue of 51 per j cent, debentures and inscribed stock is being withdrawn, and an issue bearing j interest at 5i per cent., with currency to 15th February, 1937, is to be substituted therefore. In making this announcement, the Minister said the issue would be used for State Advances, land for settlement, and funding other accounts that are providing for developmental works. Local “over-the-counter” sales at 54 per cent, had been on issue since February last, and for some lime ample funds were received from investors at this rate to meet requirements, especially for State advances purposes, whereby arrears of new loans were overcome. The diverting of our local issues to the redemption of 1929 consolidated stock that matured in London on Ist November, together with the necessity for utilising the resources of the Treasury accounts for the same purpose, temporarily used up cash that would otherwise have been available for capital expenditure in the Dominion. As stated above, earlier in the year it was possible to borrow locally at lower rates than abroad, but factors that had been operating outside the Dominion have had the effect of hardening rates, with the result that sales at 54 per cent, have fallen off considerably. The high rates offered for money in America prior to the "financial crisis there attracted capital to that country, causing the Bank of England rate to be raised to preserve the gold standard and regulate exchanges. This, with other disturbing factors, affected the money market in London, so that the final conversion of the' New Zealand consolidated stock maturing on Ist November last could only be offered to holders at higher rates than obtained in earlier conversions. The market in London was practically closed for new money at remunerative rates. In Australia, the Commonwealth Government issued its last local 51 per cent, loan at 93, with a currency of five years, yielding a return to investors (including redemption) of £5/14/4 per cent, per annum. Sir Joseph Ward consequently considers it desirable that the money still required to complete the programme for the year should be obtained in the Dominion, and he confidently invitps all New Zealanders who are able to do so to subscribe to the present issue. In this connection it may be pointed out that income tax on interest on / moneys invested is not deducted from * half-yearly interest payments, but is only payable by investors whose incomes are assessable for such 4ax.