HIGHER INTEREST

Wairarapa Times-Age, 16 May 1939, Page 5

HIGHER INTEREST

COMMENT ON LOCAL LOAN END OF CHEAP MONEY POLICY. SEEN BY STOCK EXCHANGE PRESIDENT. (By Telegraph—Press Association.) DUNEDIN, May 15. “The inner circles of finance throughout the Dominion know that the Government could not continue its policy of what is called ‘cheap’ money because of the extraordinary expenditure of public works, which has reached an enormous sum over the past three years, combined with the ‘flight of capital’ from the Dominion recent' ly, amounting to something like £15,000,000. It was known that the Government was in sore straits financially,” said Mr Harman Reeves, president of the New Zealand Stock Exchange Association, commenting on the Government’s loan proposal. “All interest rates will firm as the result of the attractive return of this long-dated loan,” Mr Reeves said. “Government loans are recognised trustee investments among other lines and they provide the basis on which most interest rates are regulated in this country. In brief, it means that municipalities will have to pay at least 4J per cent to get any money. Interest rates must go up.” Several quarters sought information this morning whether municipalities would share in the issue or could obtain. funds from it, but according to the objects of the loan no provision for this purpose has been made.

ATTRACTIVE OFFER LIKELY TO INDUCE READY I RESPONSE. OPINION IN WELLINGTON WELLINGTON, This Day. “The rate should be satisfactory as investors are already trading on similar returns, and it is not a large loan,” said the chairman of the Wellington Stock Exchange, Mr Andrew Hamilton, when commenting last evening on the general terms of the public internal loan to be raised by the Government. Mr Hamilton said he had not had an opportunity to study the full details in the prospectus and his remarks were based on his reading of the main features. “At least the Government has made the loan attractive in the method of subscription, for the small investor as well as for the big one,” he said. “There are various detail provisions which will particularly assist the future disposal of small investors’ holdings.” Capital expenditure on defence works, he said, should definitely appeal to the investor. Essential public works and development schemes were necessary, provided they were kept within reasonable bounds. It had been generally anticapated that a larger sum would be called for and the present amount was not out of bounds in comparison with previous issues. “It is pleasing to see that the largest borrower in the country has met the market rate,” Mr Hamilton added. “We hope this move shows a readiness on the part of the Government to appreciate the difficulties of local authorities and is the foreTunner of the removal of the present restriction of a rate of 3J- per cent on local body issue. LOCAL BODIES INCREASE IN PERMISSIBLE INTEREST RATE. STATEMENT BY PREMIER. WELLINGTON, This Day. "The rate will have to be lifted to meet the position of local bodies,” said the Prime Minister, Mr Savage, when asked last evening if it were intended to raise the maximum interest rate, 3J per cent, at (which local bodies are permitted to borrow in view of the fact that the Government was offering over 4 per cent for its internal loan. Mr Savage added that he would make a fuller statement in a day or so, probably today. “SOME SHOCKS” MR HAMILTON ON LOAN TERMS. RETURN TO ORTHODOX FINANCE. INVERCARGILL, May 15. “I wonder if the Prime Minister got this loan and the interest rates unanimously endorsed at the recent Labour caucus,” said the Leader of the Opposition, Mr Hamilton, commenting on the Government’s internal borowing proposals. “This is certainly an interesting turn of events for the Prime Minister, who spoke so much about the use of public credit and debt free money and that further borrowing was only debt in perpetuity. Has he also become an orthodox financier?” “The terms and amount of this loan will certainly cause some shocks. They will cause a shock first to those who supported the Government in the hope that such loans and interest rates would never again be necessary. Secondly, local bodies who have been held down to 3j per cent will now be bewildered; and, thirdly, those industries, both primary and manufacturing which need added capital to expand will, now find money harder to obtain. “It would appear that the Government is going to have its money needs satisfied before it allows others to compete against it in the money market,” Mr Hamilton continued. “Perhaps much of this money has already been spent and part of the loan may be needed to repay temporary advances. “The long term loan would appear after a hurried calculation to give a return of about £4 8s per cent, and the shorter term will return about £4 This would appear a fairly attractive return to investors, if indeed the free cash is available for investment.”

TERMS ACCEPTABLE CHRISTCHURCH OPINION. CHRISTCHURCH. May 15. Commenting on the loan issue, the chairman of the Christchurch Stock Exchange. Mi' H. Kitson. said: “I think it is a really excellent loan. The Government has made the conditions very acceptable to investors, and it should get the money inside a week. It has come on the market at the right time, too, conditions here and in America and England being better than for some •time.”

SUCCESS LIKELY

AUCKLAND STOCK EXCHANGE VIEW. AUCKLAND, May 15. Following consideration of the preliminary announcement of the new Government loan, Auckland Stock Exchange officials made the following statement: “The issue should be favourably received by the investing public and the flotation should be successful . The longer-dated issue would appear the more attractive to the ordinary investor and the provision in the event of the market selling price falling below the price of issue should appeal as a safeguard against capital loss. The issue will be advantageous to those wishing to make provision for death duties.” The immediate effect upon the giltedged market was a withdrawal of buyers pending receipt of full details of the proposals. Sellers, who have not been plentiful during the past week, were even fewer. INTEREST IN LONDON (Received This Day, 10.50 a.m.) LONDON. May 15. The city is interested in the innovation in the New Zealand internal £4.500,000 loan, whereby an alternative date for repayment is provided. Some observers consider that this method may be adopted in British financing.