THE PUBLIC DEBT.

Auckland Star, Volume LVIII, Issue 195, 19 August 1927, Page 9

THE PUBLIC DEBT.

SCHEME OF KEPATMEHT. EXPLAINED by minister. (By Telegraph—Presi Association-! WELLINGTON, this day.

Reviewing the provisions for the Te* demption of the public debt in ti# j House of Representatives last night, Mr. Stewart explained that the Public Debt Extinction Act. 1910, established a scheme of sinking fund which had to accumulate at compound interest for 75 years. That scheme meant that a huge sinking fund was accumulating which would all fall due at a specified date and involve a vast scheme of realisation. Moreover, apart from surplus revenue, there was no money available to redeem loans that matured in the interim, so that loans had to be renewed, although there were funds in existence to redeem them. The Repayment of the Public Debt Act, 1925. was designed to overcome those difficulties and to obviate the weaknesses of the 1910 Act. Under this scheme the sinking fund was used to repurchase loans on the market and the stock was then cancelled, but interest on the cancelled stock was continued at fixed rates and paid into the sinking fund to represent the interesl that would have accrued had no reduction taken place. Under the present system, debt would be redeemed in 00 year* from its inoeption instead of at the expiry of 75 years under the old system. In effect, the new system meant that debt would be repaid under the annuity plan, after [the manner of the table mortgage. The annual charges would be practically the j same, but there would be less interest i and more principal paid or repaid each year.