The Waikato Times With whloh to Incorporated The Waikato Argue. SATURDAY, MAY 30, 1931. REDUCTION OF INTEREST

Waikato Times, Volume 109, Issue 18342, 30 May 1931, Page 6

The Waikato Times With whloh to Incorporated The Waikato Argue. SATURDAY, MAY 30, 1931. REDUCTION OF INTEREST

Grave apprehensions have been aroused in the City of London by the suggested loan conversion scheme la Australia, involving as it does the. lowering of the interest rates. Interest rates are inevitably bound up with national credit and with general financial conditions. If national credit is at a low ebb, interest rates are naturally high. If trading and general financial conditions in a country are in a state of chaos, interest rates are also high on account of the general insecurity. Thus, a restoration of national credit and of general confidence in industry is the most direct i method of achieving a natural reI ductlon of Interest. It may be that I interest rates-might not fall suffleient- | ly under these improved conditions j but if that situation arose there would certainly be justification for Govern- ; meat intervention to reduce interest ' rates and remove the obstacles to I cheap • interest. That situation by no means exists in Australia to-day. On the contrary, one of the chief obstacles to a reduction of interest is Government evasion of facts. Instead of balancing budgets, there is little real effort to do so in outstanding instances, and Government deficits, therefore, have to be financed by the banks with a resultant disturbance of credit conditions. Instead of credits being available for industry, the Australian Governments are straining the whole financial system and are the chief factor In keeping up interest rates. Any artificial action, therefore, at the present time to reduce interest might have the undesirable effect of accentuating the flight of capital already witnessed in recent months because of the insecurity of internal ; conditions of Australia. A board to ! determine interest rates Is by no j means an urgent necessity at present, -and the board has no Justlflcai tion unless the rates of Interest aro | kept up at a time when natural coni ditions Justified their reduction. Jf ( . board were really to set about 1 achieving a serious reduction of interj est, it would require far greater i powers than those now proposed in j the Treasurer’s bill. Anybody soeldng ! to reduce interest at present would have to take control of the Ausliallnn t’lOvernmcnts and of their policies. The policies of all Australian Governments would have lo be reduced to conform with the economic requirements of the situation. Such a course as this would probably fall hard upon I some sections of the people, but all j would speedily receive benefit thereI from. But the general outline of

such a policy would not differ very much from the policy which should he adopted toy present Governments in facing their own problems. Mr Theodore’s solicitude for industry and the burden it has to carry in bank interest is ill timed and comes ill from a representative of any present Government in Australia. If Governments set about their tasks and did them properly they would not need to be so solici- • tous for industry. Industry will get i through the depression much better than Governments since industry faces facts. On the other hand, if industry endeavoured to solve its problems by methods similar to those resorted to by Governments, those in control of industry would deservedly be in gaol and industry would perish ignominiously. The best manner in which the Federal Government can serve those oppressed toy interest rates is to set about its own tasks in such manner as to restore public confidence in Governments and, therefore, in trade and industry at the earliest possible moment. The greatest obstacle to.cheap interest and the greatest burden to industry in Australia is Government policy. This is ‘conspicuously so in the case of the 'Governments of the Commonwealth and of New South Wales. Let them mend ther ways and other Ills will vanish.