UNCERTAINTY AND CREDIT

Evening Post, Volume CXIV, Issue 125, 23 November 1932, Page 6

UNCERTAINTY AND CREDIT

Further references to interest rates were^made by the Prime Minister when replying to the exchange deputation- yesterday. "There is no doubt that interest in New Zealand is too high (he said) and thatis one of the [first matters the Government will have to go into when Mr. Stewart comes back. We will have to see what can be done to lighten the load." No hint was given of the methods to be employed, and this is where the danger of such statements arises. Investors do not know where they stand, and the uncertainty is hindering investment and keeping up rates. In 1933 the Government requires to arrange for the redemption or. renewal of fairly heavy local loans—over £4,000,000 held ■by the public falls due during the year. Already a circular letter has been sent to holders of 5-1 per cent, stock offering renewal at 5 per cent. As the current 5| per cent, issue is subject to 10 per cent, stamp duty tha net return is £4 19sj and the renewal offer is a" shilling per cent, rnorfi. Probably most holders would be quite prepared to accept this; but when-: there.is "talk of "lightening the load" they wonder whether the methods will be the same as those applied to the 5^ per cent, stock. This uncertainty should be removed. Until investors are satisfied that the return for which they make a contract is assured they will hesitate. The slow sale- of 5 per cent, stock to which Mr. Forbes alluded is not due mainly to public dissatisfaction with the rate, but to fear of what may be done in the future. .>' A return of confidence would do more than compulsion to increase the flow of money for investment and thus to make a reduction of the rate of interest possible.