LOCAL LOANS

Hokitika Guardian, 9 January 1930, Page 2

LOCAL LOANS

INTEREST RATE RAISED. NEW DEBENTURE ISSUE. (Bv Telegrapn—Per Press Association.) WELLINGTON.' .Tan. 7. The Minister for Finance (Sir Joseph Ward) announced to-day that as from the 9th instant the present issue of 5 1-8 per cent debentures and inscribed stock is being withdrawn and an issue bearing interest at 5) per cent with currency to February Jotii. 1937, is to be substituted therefor. In making this announcement, the Minister said the issue would be used for State advances, land for settlements, funding other accounts that are providing for developmental works. Local “over the counter” sales at 5 1-8 per cent have been on issue sipee February last, and for some time ample funds were, received from investors at this rate to meet requirements, especially for State advances purposes, by which arrears of new loans were overcome. The diverting of local issues to the redemption of the 1929 consolidated stock that matured in London on November Ist, together with the necessity for utilising the resources of the Treasury accounts for the sam«| purpose, temporarily used up the cash that would otherwise have been available for capital expenditure in the Dominion.

Earlier in the year it was possible to borrow locally at lower rates than abroad, but factors that have been operating outside the Dominion have bad the effect of hardening the rates, with a result that sales at 5 f-8 per cent have fallen off considerably. The high rates offered for money in America prior to the financial crisis there attracted capital to that country, causing the Bank of England rate to bq raised to preserve the gold standard and regulate exchanges. This, with other disturbing factors, affected the money market in London, so that the final conversion of the New Zealand consolidated stock maturing on November Ist last, rould only be offered to holders at higher rates than obtained in the earlier conversions. The market in London was practically closed for new money at remunerative rates. In Australia, the Commonwealth Government issued its last local o-J per cent loan at 98, with a currency for five years yielding a return the investor (including redemption) of.£s 14s 4d per cent per annum.

Sir Joseph Ward consequently considers it desirable that the money still required to complete the programme for the year should be obtained in the Dominion, and be confidently - invites all New Zealanders who are able, to subscribe to the present issue. In this connexion it may be pointed out that income tax on interest on moneys invested is not deducted from the half-yearly interest payments, but is only payable by investors whose- incomes are assessable for such tax.