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Thursday, 13 September 1973
Page: 939

Mr SNEDDEN (BRUCE, VICTORIA) - My question is addressed to the Prime Minister. Assuming that the law is observed in the fixing of interest rates as the Prime Minister indicated, will the Prime Minister say how he expects savings banks and building societies to be able to attract funds from lenders if the interest rates they can pay on deposits are to remain the same or little changed compared with a bond rate rising from 7 per cent to 9 per cent or beyond? If these institutions cannot attract deposits from lenders how will they have funds available to make loans to home builders and buyers?

Mr WHITLAM - The right honourable gentleman used to be Treasurer, and he will remember that by statute the Commonwealth Bank has to follow certain policies; and by the terms of their charters all the private savings banks have to follow certain policies. One pf the policies they have to follow requires the investment of a certain percentage of their deposits in government bonds and in advances on the security of land. If the interest rate on bonds goes up accordingly the savings banks will derive a larger income from any investments they make in new bonds. This would presumably make it quite possible for them to absorb any frozen interest rates which they have to charge on mortgages. Savings banks in general do not get their funds by way of deposits from people who invest in government bonds or shares. Savings banks get their funds from people who want to have their money on instant call and accordingly are prepared to receive a smaller interest rate on their deposits than they would get if they were investing for a longer term.

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