BORROWING SCHEME

Auckland Star, Volume LIX, Issue 248, 19 October 1928, Page 9

BORROWING SCHEME

PRIME MINISTER CRITICAL.

WITHOUT BEGABD FOR FUTURE.

(By Telegraph.—Own Correspondent.)

DUNEDIN, this day.

The Prime Minister devoted part of his election address la«t night to references to the policy speech delivered by Sir Joseph Ward in Auckland.

Mr. Coates said it was difficult to believe any party with a pretence to political wisdom or a knowledge of the requirements of New Zealand would suggest seriously that this country coiiid stand up to the borrowing ef £70,000,000 in one year. It was more difficult to believe that such a proposal could emanate from Sir Joseph Ward, who had hitherto lost no opportunity of criticising u« Gove, nment for borrowing money for rep'odu;t!ve public works.

"If we agreed to such a suggestion," said Mr. Ooates, "we would have disaster and a repetition of the effects of the Julias Vogel policy, when New Zealand lost in a short time no fewer than 14,000 of its population by migration. Our credit would be gone, and very soon we would be at the end of our tether. It would be boom and burst." Danger of Heavy Borrowing. The Prime Minister said that, taking into account the increasing production in all parts of the world, prominent economists and financiers bad suggested the possibility of an easier range of prices. Heavy borrowing at a time when prices were high could lead only to disproportionate burdens on those who had to find the interest when the values of produce fell.

Moreover, no one could deny that it waa unwise to go in for heavy longterm borrowing when the interest rates were at such a high level as they were now. The London money market had always been ready to provide New Zealand with the finance required for its developmental works, but it had said distinctly that it was averse to lending money for relending purposes. Sir Joseph Ward's plan waa to borrow at a rate equivalent to 5 per cent and to relend that money through the State Advances Office to settlers and workers at 4.75 per cent. The Prime Minister asked who was to pay the costs of floating the £70,000,000, the costs of administering the relending and repayment operations, and the extra quarter of 1 per cent that would have to be made up on the interest.

The provision of such a large amount of money would be certain to result in an inflation of land values, and New Zealand had had too recent an experience of that to desire a repetition of it. Another disastrous result that would follow the importation of such a large amount of money would be the effect on the rate of exchange.

"Complete Change of Front." Speeches made by Sir Joseph Ward in Parliament were referred to by Mr. Coates to show that Sir Joseph's latest remarks on the subject of borrowing represented a complete change of front in a year. The uncompleted railways could not be completed in three years, and the country could not spend £10,000,000 in three years. Sir Joseph talked of increasing the population by 300,000 or 400,000 in eight or ten years, whereas the natural rate of increase was only 16,000 or 17,000.

Mr. Coates concluded that the United party's borrowing proposal was an illconsidered expedient to purchase temporary prosperity, without regard to the future or to the fact that the war debt and war obligations were keeping taxation high.