INTEREST RATE

Rotorua Morning Post, Volume 1, Issue 171, 12 March 1932, Page 5

INTEREST RATE

(Special to "Post.")

SUGGESTED METHGDS OF MAKING EQUITA18LE: • " REDUCTIONS ' SPECIAL STAMP DUTY

WELLINGTON, Friday. "In our examination of the public i expenditure we are eonfronted first ! of all with the lieavy burden of inj terest on the public debt. We cannot I suggest any basis of adjustment in I so far as the overseas portion of the i debt is concerned," statfes th'e feport , cf the Eeonomy Commission, "and we believe that some adjustment of the interest burden of the State in sc far as it relates to the internal debt must be found. "In considering the question of interest we have had to recognise that, while the return to -those who lend i money must -be sufficient to induce them to save and lend, it should not be greater than the debtors are able to bear. "A general fall in the interestlevel is vital to the revival of trade and industry in the Dominion, and the disadvantage of such a charge particulariy on a permanent basis, is that it would fail to bring about this result. Position Acute "The position of national finance is, however, so acute that we suggest the advisability of a charge in the nature of a special emergency stamp duty on the interest on all internal loans bearing interest at 4* per cent. or over. "Mortgagees and others whose incomes are derived from fixed investments cannot hope to escape a comparable and equitable contribution to the general sacrifice which it has been suggested should be imposed on holders of public securities. "Cognisance must be taken of the f act that the burden imposed by mortgage charges based on inflated values is impossible. A reduction of interest, neeessary as it may be in the meantime, is merely a palliative. The all-important question of capital values is involved. "With the incomes of those who hold loeal-body securities domiciled in the Dominion, there must be some adjustment, and we suggest the imposition of a special stamp duty in the meantime as a means of relieving the burden of local rates, to be followed later by a conversion scheme." Appeal to Investors "We believe that the Government should carefully consider the possibility of making an appeal to investors to convert their securities into loans carrying a i^duced rats of 'interest. In effect we recommend a combination of stamp duty and conversion, mainly because by this means immediate relief to the Consolidated Fund can be obtained. We suggest, first of all, that the Government should at once call a conference of representatives of the leading financial institutions, the Press and representative brokers, with a view to gauging whether a conversion issue would be likely to meet with success. Nothing would be more fatal to our credit than an unsuccessful conversion scheme, and we could not suggest an immediate appeal unless the probability of success had first been gauged. As a basis for consideration of a conversion scheme, we suggest a general reduction in interest on all internal loans, bearing interest at 41 per cent or over, of 15 per cent (that is, 3/- in the £1). If such an appeal be made, it should be preceded by a full statement of the financial position of the Dominion, and, in particular, of the budgetary position for 1932-33.