INTEREST RATES.

Waikato Times, Volume 107, Issue 17918, 14 January 1930, Page 11

INTEREST RATES.

GOVERNMENT DECISION.

OPINION IN DUNEDIN. The announcement by the Minister, of Finance (Sir Joseph Ward) that as from January 0 the present issue of 5J per cent, debentures and inscribed stock is withdrawn and an issue substituted bearing interest at 54 per cent, with a currency to February 15, is not being received with much satisfaction in Dunedin business circles.

The manager of one of the leading financial institutions in the city stated that he was very much disappointed with the action of Sir Joseph Ward. Many local bodies j he said, still had debenture issues o’n tile market at 54 per- cent., and this was the rate of interest offered by the City Council for "over the counter” money. It would appear, therefore, that If only 5£ per cent, had been offered, at least In this part of the Dominion, there would have been ’ a satisfactory response by the financial houses and the people generally, as for a good period last ybar there had been a sound demand for debenture Issues at.bi per cent,, and there was a satisfactory demand to-day. At any rate, he proceeded, Interest at 5f per oent. would have proved quite attractive for a Government Issue. i Effects on Mortgages. The result of the Government increasing the rate to 54 per cent, would naturally be that interest rates would hard.Cn all round, continued the speaker. Last year there were signs that the mortgage rate of interest would be lowered, but that was now Impossible. It might even be that the current rate on first mortgages would be Increased beyond 6 per cent. The action of the < Minister Of Finance would doubtless result in a decrease in the flow of money for ordinary business purposes and have an effect on the prosperity of the Dominion as a whole. , Sir Joseph Ward had stated at the time of the last general election that lie was going to give the ebuntry cheap money. He was going to borrow £70,000,000 at 44 per cent. It was apparently easier to say this than to do it, and the present announcement of the Prime Minister emphasised that point. 1 Sir Joseph now stated that’he fouhd it.impossible to borrow money at anything like this rate of interest. "It seems to hie,” said the speaker, "that the Minister of Finance, if he found it absolutely necessary to come on the NfeVv Zealand market for money, could haVe obtained all he wanted at 58 per cent, interest. I say that without any hesitation." .

Far-reaching Effects.

The increase of the rate must have .far-reaching effects on the operations of the financial institutions in New Zealand, he continued. It is 'known that some of these have committed themselves within the past few weeks to the flotation of loans at 54 per cent., and they will now have to met the difference between 54 and 54 per cent, themselves. The short term of the Government debentures and the good Interest rate will doubtless prove attractive to investors. The consensus of opinion amongst business people with whom he hati spoken was, however, strongly opposed to the Increase, as they considered It both ill-advised and unwarranted.

"We are going to have a higher level of interest rates," he concluded, "and that will not assist the prosperity of the Dominion."