Government Raises Rate on Debentures

Sun (Auckland), Volume III, Issue 865, 8 January 1930, Page 8

Government Raises Rate on Debentures

ISSUE AT 51 PER CENT. OVER-THE-COUNTER SALES Press Association WELLINGTON, Tuesday* The Minister of Finance. Sir Joseph Ward, announced today that, as from Thursday, the present issue of per cent, debentures and inscribed stock is being withdrawn, and an issue bearing interest at per cent, with a currency to February 15, 1937, is to be substituted therefor. In making this announcement the Minister said the issue would be used for State advances, land for settlement and funding other accounts that are providing for developmental uorks. Local “over the counter” sales at 54 per cent, had been on issue since February last. and for some time ample funds were received from investors at this rate to meet requirements, especially for State advances purposes, whereby arrears of new loans were overcome. The diverting of local issues to redemption of the 3929 consolidated stock that matured in London on November 1, together with the necessity for utilising resources of Treasury accounts for the same purpose temporarily used up cash that would otherwise have been available for capital expenditure in the Dominion.

Earlier last year it was possible to borrow' locally at lower rates than abroad, but factors that have been' operating outside the Dominion have had the effect of hardening rates, with the result that sales at sik per cent, have fallen off considerably. The high rates offered for money in America prior to the financial crisis there attracted capital to that country, causing the Bank of England rate to be raised to preserve the gold standard and regulate exchanges. This, with other disturbing factors, affected the money market in London, so that the final conversion of New Zealand consolidated stock maturing on November 1 last could only be offered to holders at higher rates than obtained in earlier conversions. The market in London was practically closed for new money at remunerative rates. In Australia the Commonwealth Government issued its last local 54 per cent, loan at 98, with a currency for five years, yielding a return to investors (including redemption) of £5 14s 4d per cent, per annum.

Sir Joseph Ward consequently considers it desirable that money still required to complete the programme for the year should be obtained in the Dominion, and he confidently invites all New Zealanders who are able to do so to subscribe to the present issue. In this connection it may be pointed out that income-tax on the Interest on moneys invested is not deducted from the half-yearly interest payments, but is payable only by investors whose incomes are assessable for such tax.