LOWER INTEREST.

Star (Christchurch), Volume XLIV, Issue 364, 4 March 1932, Page 2

LOWER INTEREST.

Audit Department’s Ruling Puzzling. Local bodies in Christchurch with j loans domiciled in Australia are puzzled 1 by a ruling' given by the Audit Depart- ! ment to the Waitemata Power Board, j that all interest payments on such loans | are subject to the reduction of 22* per (cent imposed by the Australian GovI ernments last year. No official advice 1 to this effect has been received from ! the Audit Department by any of the ! local bodies in Christchurch, and some of them have remitted the full interest { rates to Australia within the past few i weeks. The ruling of the Audit Department is based on an opinion of the Crown Law Office. The question was raised in the first place by the secretary of the Waitemata Power Board, who referred it to the board’s solicitors and the Audit Department. On Monday the board received a telegram from the Controller and Auditor-General, Colonel G. F. C. Campbell, advising that the board was entitled to a reduction of 4s Gd in the £1 on interest payable in Australia, and that any payment of interest without deduction would be contrary to law. Authority for Deduction. The deduction is to be made in terms of the interest reduction legislation of the Australian States, which gave effect to the Premiers’ Plan drawn up by the Commonwealth and States for the amelioration of Australia’s financial conditions. Under these enactments, an obligation to pay interest on local body debentures by any debtor was to be satisfied by a payment less nine-fortieths than that contracted to be paid—a 22i per cent reduction.

The local body in Christchurch that will benefit to the greatest extent by the reduction in interest is the Drainage Board, which has loans totalling £275,000 domiciled in Australia. Interest on a portion of this sum was paid in December last, and further interest payments are due at the end of this month.

Mr C. F. Champion, secretary of the board, said yesterday that he was at a loss to understand the ruling given by the Audit Department, and he had no knowledge of the position other than what he had read in the newspapers. The Christchurch City Council has only one loan domiciled in Australia. This is the workers’ dwellings loan of £15,000, raised in 1926 at 51 per cent. The interest is payable in Sydney, and the last payment was made at the full rate on February 1, the council making a saving of over £4O on the exchange. The Tramway Board has a loan of £25,000 domiciled in Australia, and has been paying the full rate of interest, plus exchange. “Form of Repudiation.”

A financial authority expressed the opinion yesterday that the ruling of the Audit Department compelled the local bodies to adopt a form of repudiation. He said he regarded the ruling as by no means definite and potentially dangerous. “ The effect of this ruling will be to ruin the credit of New Zealand local bodies in Australia,” he continued. As far as he understood, the interest reduction legislation passed by the Australian Governments applied only to domestic loans and did not affect overseas loans.