LOCAL BODY LOANS

Wanganui Chronicle, Volume 83, Issue 49, 28 February 1939, Page 6

LOCAL BODY LOANS

\V tTH Go vernment 4 per cent. Stocks (1946) being sold on the Stock Exchange at £9B 15s, it is obviously impossible for local bodies to be able to dispose of their debentures which carry an interest rate of only 31 per cent. Because of their greater security, Government bonds form the basis of the gilt-edged security market and debentures with less backing than that of the whole of the Dominion must necessarily offer a more attractive interest rate than the current yield on Government bonds or local body debentures will remain unsold. This is what is happening to-day and the Auckland Transport Board reports that it has raised only £B7OO by the sale of its 31- per cent, debentures and that it is still short of £251,718 in respect to an expenditure of £260.518. Doubtless other local authorities have suffered similar experiences. These experiences, however, have no effect upon the Government for the latest issue of the Gazette publishes consents by the Executive Council for the following loans bearing interest at the rate of 3| per cent.: The Taradalc Road Board, £800; North Auckland Electric Power Board, £lOO,OOO, and the Hawke’s Bay Electric Power Board, £20.000. There is a proviso that “no monies shall be borrowed under this consent after the expiration of two years from the date” of the consents, namely February 14. The Government will require soon to float an internal loan for a fairly large sum and naturally does not desire to see the market disturbed by the establishment of a higher rate of interest. but surely it would be better for the Government to launch its loan at 4 per cent.—for that appears to be the rate which will have to be paid—and allow local bodies to pay a slightly higher rate to enable them to get the money than to continue the present farce of consenting to local body loans at rates which vitiate their chances of successful flotation.