STATE HOUSING

Dominion, Volume 37, Issue 233, 29 June 1944, Page 4

STATE HOUSING

Financing By Reserve Bank

Reference was made by Air. Bowden, M.P. for AVellington West, in an address in Northland, to the Government’s housing activities. He said that for 1943 these operations showed a profit of £t>2s6. However, he said, that was due to a very substantial lowering of the interest rate charged by the Reserve Bank. There had been, in fact, successive reductions each year between 1938 and 1941, and from that it would appear that as prospects of losses in operation became evident t-he interest rates were reduced, thus concealing from the public the fact that State enterprise in building was unprofitable. The Government, said Mr. Bowden, should be invited to state whether or not the financing of the State housing activities by- the Reserve Bank did not- tend to “freeze” a large amount of sterling exchange. Those familiar with banking practice know that the statutory requirement of the reserve was 25 per cent, of the notes and other demand liabilities.. As the advances to the State for housing were over £21,000,009 (and ou “J-hf 1 -' account it was brought to about £40,000.000), presumably several million pounds of sterling exchange had to be ear-mark-ed accordingly, and that sum was not available for financing the current import aud service requirements of the Dominion. “The question is.” he added. "how far can this policy be carried without the Minister of Finance beiqg forced to lower the statutory reserve requirements?”