Rise in New Zealand Not Antieipated

Hawke's Bay Herald-Tribune, Volume 81, Issue 9, 4 October 1937, Page 6

Rise in New Zealand Not Antieipated

Onr Own Correspondent.)

CORPORATION'S VIEW

(From

WELLINGTON, This Day. "The policy of lower interest rates enunciated at the Britisb Empire Conference at Ottawa in 1932, and confirmed collectively and individually by the several Governments within the British Comoionwealth of Nations in succeeding years, is still being aetively maintained," statep the annual report of the State Advanees Corporation for the year ended March 31 last, which has been tabled in the House of Repre* sentatives. "A similar policy has been adopted by practically all other important nations, but the countries where the policy has been most successful have been those within the sterling group. "Speculation has been rife as to the prospect3 of a general rise in interest rates, and there* has been a tendeney in certain directions to inspire suSh a rise. There is a school of thought which believes that the lessons of past experience indicate serious doubts as to the practicability of maintaining the present low levels. While the world monetary syStem was based generally on a gold standard and subject to less control, such a view as expressed above would carry weight, but the position to-day is entirely altered. Events of External Origin. "Past reeords bear witness to the fact that capital enterprise, industry, and trade in Great Britain have frequently borne the brunt of higher interest' rates than they .woulcl have but for unfavourable events of external origin. Progress in technique, however — e.g., the Exchange Equalisation Account, Treasury control of capital issues, etc. — has introduced a method insulating Great Britain 's internal conditions from the effects of external events,," the report adds. "This principle of British monetary policy was summed np some tiine ago by the present Prime Minister, then Chancellor of the Exchequer, when he said: 'If this country were to go back to the gold standard it would mean that we should no longer be free to adapt our policy in regard to price levels and cheap money to our domestio requirements. We should have to adjust it according to conditions overseas, over which we have no control, at a timo when international affairs were unsettled, and when large movements of capital sufficient to upset established . equilibrium were by no means beyond the bounds of possibility.' Recovery in Great Britain. "Trade recovery in Great Britain has not been accompanied by any appreciablo rise in interest rates. The cheap money policy of both Great Britain and the United States still pre* vails, assisted by the weight of funds in each country. Opinion as to future trends is by no means unanimous, but a recent statement by the well-known authority, Mr. J. M. Keynes, to the effect that in the years to come investors cannot expect a long-term xate of interest in excess of 3 per cent., has not been seriously "challen^ed." On present the resumption of internationai lending indications it may fairly be said that on a large scale and the still further widening qf international trade are the two factors necessary to challenge seriously the present policy of low interest rates in those countries. "Toward the end of 1935 the course of events in Australia to some extent influenced New Zealand opinion as to the trend in interest rates. Any comparison, however, between New Zealand and Australia must be approached with caution. Conditions are by no means parallel in the two Dominions. The position of London funds and local cash resources in Australia at the period referred to caused concern."