Higher Interest Rates In Govt. And Local Body Loans

Press, Volume C, Issue 29505, 5 May 1961, Page 14

Higher Interest Rates In Govt. And Local Body Loans

(New Zealand Press Association)

WELLINGTON, May 4. An increase in interest rates to 5 per cent, for longer term stock in the Government’s new conversion loan and for all new local body loans was announced today by the Minister of Finance (Mr Lake). Three Government loans which mature this year—on June 15. July 15 and August 15—involve a total of £56 million. These loans at present carry interest at 44 per cent, for the first two, and 3 per cent, for the third. The Government is offering holders of these loans two terms. The shorter term is a fouryear stock, maturing on June 15, 1965, at £4 15s per cent, to be issued at par. The longer term is a 14-year stock, maturing June 15, 1973-75, at 5 per cent, at par. “Because of the large amount involved in this conversion offer, it will have an important bearing on the

Government's financial planning for the year and on the economy of the country,” said Mr Lake. “More than 28.000 people hold stock in the maturing loans. Those who take up this conversion offer will be helping their country and I appeal for as many as possible to reinvest in the new loan and so make the conversion an outstanding success.” Mr Lake said the economic difficulties which faced the country were being dealt with by the Government on a broad front and the decision taken on the conversion offer fitted into the pattern of corrective measures the Government was taking. Current yields on Government stock in the market were in many cases substantially above the yields ruling when the recent cash loan was raised, he said.

This was a result, in part, of the limits placed on trading bank advances and a necessary sequel was an increase in tfie Government borrowing rate to lessen any outflow of cash from nonconversion of maturing stock. “An immediate effect of the increase in the Government borrowing rate is to raise it above the current interest rate for local bodyborrowing,” said Mr Lake. “From today, the maximum rate for local authority borrowing will be increased to 5 per cent. "Holding the local authority rate near parity with the Government rate is a temporary measure designed to assist the present major task of Government loan conversion and its effect will be studied for further consideration. if necessary, later. "Any local body currently raising loans should, therefore, apply to the Local Authorities Loans Board for a variation of its existing authority to enable the new rate to be paid in respect of unraised parts of loans.”