INTEREST RATES

Evening Star, Issue 21746, 14 June 1934, Page 7

INTEREST RATES

THE AUSTRALIAN DECLINE A GENERAL MOVEMENT For some decades interest rates have not been so low as they are to-day. states the .Melbourne ‘ Argus.' Not iiiau.i years ago .'5 per cent. Victorian Government stock was worth in the open market not much more than halt its face value, but to-day the Commonwealth is putting a loan on the.market, with every prospect of success, vv - itli an interest rate of 3$ per cent. 3ho Saving? Bank rate on deposits. Hi per cent., i? the lowest for thirty years, and only 2J per cent, a year is offered by the trading hanks for deposits fixed for two years. Bank oyerdralt rates arc the lowest in the history ol Australia. The Treasury bill rate, which was as high as 6 per cent, a lew years ago. is Hi per cent, to-day. Mortgage rates are down in conformity with the state of the money market, and some private.contracts are being made at less than advertised rates, but. the securities are of tlx*? highest order. As i? tin? case with the individual, eajjxital must earn its wages, but when the market is oversupplieu it must accept lower rates as the individual must accept lower pay. This condition of affairs is likely to continue until the demand sets in the other way. when competition will cause both money rates and labour rates to rise. Few writers on economics like the task of forecasting the future in the money market, but Mr J. M. Kynes has ventured the opinion that the low money rates will continue for some years, during which interest on giltedged long-term British loans in London will not exceed 2J per cent., and may possibly fall below that level. The ' Economist ' draws a parallel between the conditions of to-day with those of the 'nineties of last century, and, while emphasising the fact that different factors arc operating, jiees some significance in the point that cheap money persisted throughout the industrial recovery phase. If history repeated itself exactly, the ‘ Economist ’ thinks that investors might look forward to at least another year of improving trade, and several subsequent years of active trade, with anything from six months to a year of cheap money ; but it admits that a precise analogy between periods separated by nearly forty years is hazardous. Discussing the same subject. Professor Gustav Cassel directs attention to the fact that the present lowrates of interest are in a great measure merely the result of the para lysatiou of enterprise by- the crisis, people being deterred by the perpetual fall in prices from embarking on new undertakings in tile nature of long investments. Once this dear is overcome private enterprise may make considerably greater demands on capital. COMPANY BUSINESS A GENERAL RECOVERY In the annual reports of nearly all the companies which' have been issued recently a- distinct improvement m trade during the latter half of the past year, is recorded. This is in keeping with experience overseas (says the Christchurch ‘ Times ’). and it is significant- that at annual meetings it has been stated that business, in the new trading period, had started really well. The weekly returns of bank debits and clearings support this view. Bank debits to customers’ accounts in April averaged-£14.678,000 per week, a level much above that recorded in the corresponding month of the previous three years, and the incomplete returns tor Mav showed increased activiity. During the past few ' years it has been necessary to write off a great deal to cut losses, hut with the return of better days this process stops, and the industry of the country is liable to advance again, though with the caution born of experience, COLOMBO TEA SALE Mr L. M. Wright has received the following cabled report on the Colombo tea auction of June 12;— The market at yesterday’s sale was strong; common teas advanced about a farthing, all other grades being firm to dearer. Quality showed improvement. At next week’s auction 2,410,0001 b are catalogued for sale.