INTEREST RATES

Hokitika Guardian, 31 May 1932, Page 6

INTEREST RATES

STATE’S DIFFICULTIES

WELLINGTON, May 30.

The impossibility of the Government legislating to regulate interest rates on future financial agreements is emphasised in the official memorandum exexplaining the rent and interest sections of the National Expenditure Adjustment Act.

“It is to 1 bei particularly noticed that Part 111 of the Act under review has no application with respect to mortgages, leases, or other contracts entered into after April 1, 1932,” the statement says. “In this respect the law will be regarded by some as being defective. This is, of course, a matter on which there may well be differing opinions.

“In support of the view that has in fact been adopted by the Legislature it may be urged (so far as the fixation of rates of interest is concerned) that, as there can be. no effective compulsion placed on owners of money to lend it at unremunerative rates, or indeed to lend it at all, any attempt by the Legislature to prescribe a maximum rate of interest, or to prescribe a scale of interest rates for classified securites, would place a prospective, borrower in a worse position than he is in at the present time if persons with money available for investment declined to lend it at the prescribed rates.

“If, for example, the Government had and exercised authority to prescribe the maximum "rates of interest that could be charged on loans to farmers, it might well happen that many investors would prefer the security offered by Government or local authorities’ debentures, and that an insufficient amount of money would then be available for the assistance of the farming industry. “In such an event the Government would be looked to, through its State lending departments, to provide sufficient money to meet at the prescribed rates an ever-increasing proportion of the legitimate requirements of the farming community. Such a responsibility could not he lightly undertaken by any Government.”

PUBLIC TRUST REDUCTIONS

Two notices in the current issue of the Gazette give effect to reduced interest rates payable by the Public Trust Office, in accordance with power taken under the Finance Act of last session.

Up to the present, the rate paid on deposits in the Common. Fund has been per cent. This has been reduced to 4 per cent. The call rate for these deposits has been reduced from 3 per cent, to 2 per cent.

The rates payable on investment agencies have, been reduced by onetenth. ~ "