Hokitika Guardian & Evening Star THURSDAY, DECEMBER 9, 1920. INTEREST ON MONEY.

Hokitika Guardian, 9 December 1920, Page 2

Hokitika Guardian & Evening Star THURSDAY, DECEMBER 9, 1920. INTEREST ON MONEY.

At a meeting of the Wellington Chamber of Commerce recently there was an interesting discussion on the question of cheap or dear money, that is lower or higher rates of interest- The cheap money schemes of this country have been considered always oue of the foundations whereby the country emerged from stagnation to prosperity. It was due to the Liberal regime that the cheap money scheme was inaugurated, following the policy of self-reliance -which the conditions of the finances imposed when the Liberals got into power in 1891. The Government advances to settlers, workers and local bodies one of the great policy strokes of the Liberals, for it freed the settlers from the toll for heavy mortgages, and the Government financing the settlers brought more money into the country and created n healthier tone. The latest available returns at hand show that loans to the amount of £26,004,047, have been applied for, £18,076,170 authorised, and £9,972,323 repaid. There must have been an enormous saving to the people by reason of the cheap money—irpnninjg: into millions. Last year the departmental profit in running the State lending office was £55,765. However, despite these obvious facts, some of the commercial men in Wellington consider tluit the fixation of low interest rates is .simply driving capital from the country. Money is at a lower interest in New Zealand than outside now, and a good deal of money is going to Australia, where interest rates are higher. New Zealand securities however are sounder, and it is safer to invest here than outside. One gentleman Mr W. Stuart Wilson said that, in his opinion, the Government, and the bank in New Zealand had performed yeoman service in keeping interest rates down. If interest rates were raised before such action was absolutely necesssary, it would be found difficult to finance industries; and if, money were found to he leaving the country, the Government and the banks could soon rectify matters. On the other hand another speaker. Mr A. F. Roberts said that, in the case of one company alone, hundreds of thousands of pounds had left New Zealand. He deprecated any system whereby cheap money coujd bo obtained, adding: ‘‘lf a man had to pay more for borrowed money ho would not be so eager to borrow’ and to settle on high-priced land.” His opinion w’as that the policy of low Interest was merely driving awnv money from the Domin ion, which ho thought would sooner or later regret the course it was adopting. The president of the chamber (Mr M. A. Carr) considered that the country was limiting profits and interest rates v’hilc at th e same time refusing to limit taxation. Under present conditions both money and settlers would he robbed of any incentive to stay in the country. Cheap money, was not an advantage, but meant dear goods. Dear money (i.o. higher intorest rates) would mean cheap goods, and if money were harder to obtain, the high prices question ivotild not be such a. momentous one. In reply to Mr Carr, Mr Wilson said that commercial men were of opinion that w’lien the price of money went up, the price of commodities fell, which led to a fall in land values. The latter situation led to acute financial depression, and sometimes ended in panic. Mr Wilson might have recalled what the cheap money had done in the past.. As regards settlers over 68,000 had applied for loans and over 13,500 workers. Those represent a substantial section of the population, and it may be accepted that it was in the interests to seek the cheap accommodation. In the light of the substantial repayments made, the business has been sound for the country, and many a struggling settler has been helped on the road to opulence. The price of money is like anything else, regulated by supply and demand. With the English money market practically closed to the colonies

they must find the money within or offer higher rates to attract investments in loans > from outsiders. That is happening now and hardening the money market. Dear money means a tightening up of enterprise and less employment—which is not good for a young and arowiutr country.