NEW £10,000,000 WAR LOAN

Southland Times, Issue 24825, 18 August 1942, Page 5

NEW £10,000,000 WAR LOAN

Higher Interest Rate Urged

(Special) DUNEDIN, August 17. The Hon. W. Downie Stewart, who was Minister of Finance in the Coalition Government, commented today on the recent announcement that a new war loan of £10,000,000 would shortly be issued to the public and that the terms of the loan would be made known later. When the last loan of £15,000,000 was raised it was over-subscribed, but this result, Mr Stewart said, was obtained only after much urgent pleading, cajoling and begging by means of the radio and other forms of publicity, or by inducing large investors to double or increase their first applications. “Is there not,” Mr Stewart asked, “a lesson to be learned from experience in floating that loan, for there is still plenty of money awaiting investment and there is a keen patriotic desire to supply the Government with the funds necessary to carry on the war? The obvious explanation is that the Government is not willing to pay the market price for money. Its last loan is already at a discount. This means, in effect, a capital levy on all those investors who, for one reason or another, have to sell war bonds in the market. The Government pays the market price for all other war material, such as steel, cement and foodstuffs. Why should it set a different standard when it sets out to hire money? REDUCED YIELD “Market prices show that the public expects Government loans to yield 3J per cent., whereas the Government ,so far is willing to pay only 3 per cent. I am not thinking of large investors, whose income tax and social security tax reduce the yield of their 3 per cent, investments to perhaps 15/- for each £lOO.. The addition of J per cent, on Government loans is little help to them in any case, but the small, thrifty investor, dependent on a slender income for a livelihood, is deeply concerned. No doubt this thrifty person will respond on patriotic grounds as far as he can, even though he knows he will lose some of the capital because of depreciation of the loan, but he cannot continue to do so for further loans indefinitely. This investor is of immense value to the Government, although a few years ago his habits of thrift were jeered at as out of date and mischievous. AUSTRALIAN INTEREST

“If Australia, which is a larger and wealthier country than New Zealand, finds it possible and advisable to offer 3| per cent, can New Zealand expect to pay only 3 per cent.? Much of the money awaiting investment is held by trustees, who must do the best they can for their clients. It is surely unwise to force them to seek trust investments that yield more than Government bonds. To encourage thrift bonds should yield such a rate of interest as will keep them at par, or 'as near par as possible. It is in the Government interest to secure this result, otherwise the flotation of future loans is prejudiced and the Government credit depreciated.”