INTEREST CUTS

Hokitika Guardian, 29 March 1933, Page 5

INTEREST CUTS

ALL-ROUND POLICY

STATEMENT BY MR COATES.

(Per Press Association Copyright.)

WELLINGTON, March 28. On the eve of his departure for the north, the Minister ot Finance ( tne Rt. Hon. J. G. Coates), reieired to the steps now being taken to give euect to the Government s policy or | bringing about an ail round reduc- . tion in interest rates. He stated that J the outstanding success of the conversion operations had dispused of tile matter in so rar as Government securities were concerned. , Local body securities were also covered by tile legislation passed last session. The intention of the banks to reduce their overdraft rates, for best accounts, to 5 per cent had already been announced, and this reduction would be made a s from the Ist May next. It now remained for (the Government to take action to give effect to the balance of tho interest reduction programme, as previously outlined in the House; Accordingly, he said: Steps are now being taken to reduce the Post Office Savings Bank rate of interest

to 3 per cent, as from the Ist oi April, ‘The present rate is 3| per cent ou deposits up to £SOO, and 3-1 per cent on deposits above that amount up to the limit of £2,000. From the Ist of April, however, mil deposits will bear interest at 3 per cent. Concurrently with the reduction in the Post Office Savings Bank rate, an Order-in-Council is being issued reducing the rate for the Trustee Savings Bank to the same level, viz, 3 per cent as from the Ist of April next. The Trustee Savings Bank rate is tit present on the same levm as the Post Office rate, so thi s Order-in-Council does no more than preserve the existing relative position. In reducing the rates for Savings Banks, the Government must, in equity, take steps to see that they do nut suffer as a result of such action. Acit is necessary to make u fuitlier reduction in the maximum rate of interest that may be paid uy Building /Societies and Investment Companies. Otherwise funds would tend to flow from the Savings Banks to these institutions. It is realised, however, that Building Societies and Investment Companies are affected by the mortgagors relief legislation. It is not desired to increase their 'difficulties. Accordingly, the reduction now being made will apply to new deposits only. That is t 0 say, all I 1 1 enewals of the deposits at present ("field .by these institutions may be effected at rates within the maximum fixed by tlie existing Ordevs-in-CoutK’U. For new deposits, however, the maximum rates that may be paid have been lowered by % per cent. Accordingly, under the Orders-in-Cound! now being issued, the maximum rates for new r moneys will be as folloivs: Cal], 2% per cent; three months 3 per cent; six months, 3.i per cent; tw r eiv c months 3] per cent; two years and over 4 per cent. These new rates win operate as from the Ist April. aho rates are l per cent above the deposit rates of the banks, winch, it will be remembered, were reduced in December last.

Up to the present no Order-in-Council Ji n s been issued limiting the j 1 ates of interest that may be paid jby local bodies for deposits, but, in fairness to other instituticins. action is now being taken in this direction, and as from the Ist of April next, I local bodies for the respective periods | concerned will be restricted to rates I of interest not exceeding those pre- | scribed for new moneys accepted by i the Building Societies ;pul Investment Companies, that is to say. in so far as new moneys are concerned, local bodies and investment companies are placed on the same level; but as local authorities cannot accept deposits for any period in excess of a year, the maximum rate that may |be paid by any such authority is 3J j per cent, the same as is fixed for Building Socieities and investment | companies for periods of from 6 to 12 months.

JMiiany, added Mr Coates, steps have been taken to reduce the rate of interest that may be paid by the Public Trustee on investments in his Common Fund. This rate which is at present 4 per cent is being reduced to 31 per cent as from the Ist April next. At the same time, the maximum rate that may be paid by him on moneys hereafter accepted by him under investment agencies has also been limited to 31 per cent. In respect of the investments already held

under such agencies, a further five per cent reduction in the amount oi the /.nterest payable is being made with a minimum of four per cent. The necessary Orders-in-Council, etc., are being issued to-day in a special Gazette.