FEDERAL FINANCE

Hokitika Guardian, 29 May 1931, Page 3

FEDERAL FINANCE

TAX FREE BONDS. (Australian Press Association) MELBOURNE, May 28. Although finality has not been reached, it is regarded as practically certain that the Premiers’ Conference wnich is also known as the Economic Conference. since it includes a num,.er of financial experts and economists. will adopt the principle of a reduct. oll 111 tlie interest on Government bonds within Australia. The greatest obstacle to overcome concerns the manner in which the tax free bonds should be dealt with. These are guaranteed free of Income

The Prime Minister (Mr .Sc-ullin) Mr Theodore (.Federal l rea.-mre'i. and Mr Lang (N.S.W. Premier), insist that the tax-free bonds .should be treated in the same fashion as the other hauls, thereby meaning that they should now be taxed thus male ng an all-round equality of sacrifice. 'Flier colleagues express the (.pinion that this will amount to repudiation, and would probably recoil upon the Government when it is seeking future loans. The debt in Australia, inclusive of I 1 the Treasury bills, is now about 550 millions. The annual in 'crest bill thereon is twenty-nine millions. The average interest rate is about €5 4-s. The tax free securities amount to • ninety millions, half of which is held ! by the public. | The Experts’ Committee makes no dofin to suggestion as to how the tax--J free securities should be treated. It 'eaves that, to the Conference, but it hints that the holders might bo invited N accept a reduction of interest, or, | alternatively, that some form of com- ! pulsion might be adopted. I There has been a tentative acceptance bv various savings banks of a re-

duction of one per cent, in interest •••'tes on their depos'ts.

Following this, Mr A. C. Davidson, Manager of the Panic of New South Wales, has agreed to place a similar nrnpoval before the trading banks. He intends to urge the acceptance of the (eduction, on the condition that it forms part of the general economy plan now before the Premiers’ Conference. N.Z. RATE. AUCKLAND, May 28. When a formal resolution in re cord to a now loan issue of -£'25.000 at o\ per Cent, for barb'uir works was presented to the Harbour Board for adop-

tion, Mr T. Blood worth moved an am

ointment, i.jai the rate should be reduced to I) per cent, because ot the urgent need of lower Interest'. The raising ol £25.000 for thirty-live years at 5J per cent, tended to keep up the rale of interest. Money should be secured for less.

A member: You tie an ipdiiist. “1 am not joking,” said Mr Bloodworth. ‘'Representative business men in Wellington gave evidence before the Arbitration Court that the rate of intere t must come down, and we should take action on those Hips, espeo ally after what has been done to tile salaries of our employers. in a few months, the board may be able to raise money. on more favourable terms.” Mr E. W. Ider What should the board do in the meantime ? Repudiate its loan. The amendment was lost. EFFECT ON AUSTRAL FAN CUT. CHRISTCHURCH, May 28. Professor To'-kcr. referring to the Australian interest cut plan, said: “1l is obviously quite possible- that a group of banks may agree to reduce deposit and overdraught rates 1 per cent, but if I lie reduction in deposit rates leads, as it might well (TV>, to a contract *(in of fixed deposits, and if the reduction in overdraft rates stimulated an increased demand for overdrafts, the situation could be met only by ra*inning'credit more strictly than lias yet lav 11 attempted.” j 1,1 the case of the savings banks the processor continued, it was a

simple matter to reduce interest to tfeP'lsuors, but it; was pot clear from the cable whether it meant that the rates <-f interest collected by savings banks on investments n local body and 1 Government securities are to he red need al 0 by 1 per cent.

“If the flow ot funds between Australia and New Zealand were Irea,” said Professor Toeker, “the reduction of interest in Australia would probably lead to increased Australian investments in New Zealand, for money is likely to move from a place of low market value to a place where it-- e.- rn ing power is higher, but the banks have boi'ii striving for some time past to prevent free movement of funds between Australia and New Zealand and if tb'y have succeeded in prevailing this movement then tlm Australian and New Zealand money markets may bo regarded its effectively separated from cue an ><Vr.” Under these eonditi ns any close connection brtwom jo tcrest rates in A m--and New Zen hind was unlikely and a change in interest rates in Australia might ha>c no effect, on tlm sup nlv (!(>■• livl an-! pri'-n of money in New Zealand.