INTEREST RATES

Waipa Post, Volume 44, Issue 3184, 31 May 1932, Page 4

INTEREST RATES

PROBLEM OF FUTURE T - CONTRACTS. STATE’S DIFFICULTIES. The impossibility of the Government legislating to regulate interest rates on future financial agreements is emphasised in the official memorandum explaining the rent and interest sections of the National Expenditure Adjustment Act. “It is to be particularly, noticed that Part 111. of the Act under review has no application with respect to mortgages, leases, or other contracts entered into after April l y 1932,” the statement says. “In this respect the iaw will be regarded by some.as being defective. This, is of course, a matter on which there may well be differing opinions. “ In support of the view that has in fact been adopted by the Legislature it may be urged (so far as the fixation of rates of interest; is concerned) that, as there can be no effective compulsion placed on owners of money to lend it at unremuneracive rates, or indeed to lend it at all, any r attempt by the Legislature to prescribe a maximum rate of interest, or to prescribe a scale of interest ; rates for classified securities, would place a prospective borrower in a worse position than he is in at the present time if persons with money available for investment declined to lend it at the prescribed rates. “If, for example, the Government had and exercised authority to prescribe the maximum rates of interest that could be charged on loans to farmers,’ it might well happen that many investors would prefer the security offered by Government or local authorities’ debentures, and that an insufficient amount of money would then be available for the assistance of the farming industry. “ In such an event the Government would be looked to, through its Stare lending departments, to provide sufficient money to meet at the prescribed rates T an ever-increasing proportion of the legitimate requirements of the farming community. Such a responsibility could not be lightly undertaken by any Government.” PUBLIC TRUST REDUCTIONS. Two notices in the current issue of the Gazette give effect to reduced interest rates payable by the Public Trust Office, in accordance with power taken under the Finance Act of last session. v Up to the present, the rate paid on deposits in the Common Fund ha? been 43 per cent. This has been reduced to 4 per cent. The call rate for these deposits has been reduced from 3 per cent to 2 per cent. The rates payable on investment agencies have been reduced by onetenth.