AUSTRALIAN FINANCE

Wanganui Chronicle, Volume 74, Issue 137, 12 June 1931, Page 9

AUSTRALIAN FINANCE

THE CONVERSION LOAN SOME OF THE DIFFICULTIES. LOWER INTEREST BATES. The latest Australian newspapers to hand show that the Economic Conference sitting in Melbourne has been engaged chiefly in the discussion of difficulties raised by the proposal to effect a saving of 22J per cent, on the interest bill on. all loans domiciled in Australia. Some of the points discussed were: Th period of the proposed conversion loan, the position of trustees holding trustee securities, the relation of the scheme to municipal and local body loans, and to overseas trade moneys which have accumulated in Australia owing to the exchange position and have invested in short-term Government securi ties. The representatives of the banks were definite in their view that the proposed currency of the conversion of 40 years was too long. They regarded as essentia) that options should be given for various periods. To prevent too much of the converted holding being for a short term, it was recognised that holders should have the right to convert only portion of their present securities into the short option. The question of providing for redemption by means of drawings was also considered. The banks said it would not be possible for them to convert existing Treasury bills into the new long term loan. These bills were held as portion of their liquid assets, and could not be funded for a long period. The banks said, that if the conversion was adopted the rate of interest on the Treasury bills could be reduced to 4 per cent. This Yvas the personal view of the banks and was subject to confirmation. The question was raised that the conversion loan scheme should provide fur trustees being authorised by State law. to take the action required of them under the conversion scheme. It was pointed out by Sir Robert Gibson that it would be necessary to have a very critical examination made of ’-he liabilities and disabilities of certain companies in respect of the management of stocks, especially of securities held in respect of individual trusts. The legal committee would, no doubt work out the plan of legislation necessary to enable them to conform with the new propasals. The Under-Treasurer of Victoria (Mr I’itt) presented the report of th-j con.mittee of Under-Treasurers. This provides that where trade money has been temporarily invested in short-term securities because of exchange disabilities, the holders should be given i,he right to convert into three years’ security, on the recommendation of the banks and the approval of the Commonwealth Treasurer, subject to other con ditions, similar to the main conversion. The same committee recommended that the States, in conjunction with municipalities and local authorities concerned, arranged for all securities to b" subject to a reduction of 22>V per cent, in the interest yield, either by a con version into new securities, nominal rates to be fixed later, or by straightout; reduction of interest on existing securities. \\ itli reference to the overseas money several members of the conference held that the three years’ period mentioned, was too long. As to municipal loans, it was pointed out that Governments that had lent money to municipalities, after having borrowed it abroad, could not reduce the rate of interest unless tin* lender reduced the rate,