BORROWING FROM AUSTRALIA.

Auckland Star, Volume LIII, Issue 296, 14 December 1922, Page 4

BORROWING FROM AUSTRALIA.

For more than one reason ratheT more than usual interest attaches to the fact that the Government has raised a loan of £500,000 at 5* per cent at par in Australia. The issue Is "to redeem the greater part of Australian loan money totalling £630,450 that fails due in the current year. Once this Is redeemed, Australian loans will not trouble the Government to any appreciable extent until 1927, when £735,300 falls due. The first point to notice about this loan is that the interest payments do not yield income tax. A good deal of capital has been made out of the fact that in the case of so much of the money borrowed in New Zealand for war purposes the Government surrendered the right to tax, but here is the Government, after offering to redeem this money at 51 per cent, taxable, paying 5J per cent to Australian investors, whose incomes it is unable to touch. The second point is the effect on the New Zealand-Austra-lian trade balance, which is heavily against this country—to the extent of much more than three millions in 1921. Loans in Australia—the Auckland City Council.has floated a loan there in addition to the Government issue—will ease this balance, but it must tie borne in mind that the interest on the principal will have to be paid in either goods or gold. As a result of Australia's bold and expanding policy of manufacturing, the problem of New Zealand-Australian exchange may prove difficult. To use Australian money for New Zealand publio purposes is an obvious counter to an unfavourable balance of trade, hut it is a drawback that the interest goes abroad. A natural way to meet this balance is by invisible exports, such as shipping service. Most of the AustralianNew Zealand carrying trade is in the hands of the Union Company. This company used to be a New Zealand enterprise, so that the greater part of the payment foo its services in this trade came to New Zealand, but now, owing to the merging of the company into an English concern, much of the money formerly absorbed by the Dominion goes to England, and thereby makes our exchange relations with Australia less easy.