THE AUSTRALIAN LOAN.

Auckland Star, Volume LXIV, Issue 125, 30 May 1933, Page 6

THE AUSTRALIAN LOAN.

• Australia is definitely down to a 33 per cent interest level for government borrowing. Any doubts which may have existed on this point have been swept away by the spectacular success of the £5,000,000 loan, which has been ! over-subscribed within a week. Six months ago such terms as those now offered made no appeal to the Australian public. An interest rate below 4 per cent was then too low to attract investors, and the greater part of the £8,000,000 Commonwealth loan at 33 per cent issued in November and December had to be found' by the banks. Less than £3,000,000 was subscribed by the public. To-day the situation is entirely changed, and the Federal Government can see the fruits of its efforts to reduce the price of money. On this occasion, as Mr. Lyons has said, every penny raised is to be spent on public works, thus serving the double purpose of increasing the flow of money and giving employment to the workless; It is the kind of programme that has been advocated strongly in Britain, particularly by Mr. Keynes and others, who contend that public investment is essential to bring recovery. Governments, according to this view, must lead the way not only because they alone can act on a large scale, but, what is more important, because they can raise such money as they need at rates which are exceptionally low. In Australia the movement towards cheaper money began much earlier than in New Zealand, and conditions there have become ripe for internal borrowing

> sooner than in our case. It is only three months since we converted our internal State debt, and local bodies to-day are preparing their schemes. Progress will be easier and more rapid if investors are able to give their undivided attention to their present securities before we think of emulating Australia in an active policy of public works. The aim should be to complete the readjustment of our interest rates over the Avhole field as rapidly as possible. One advantage we have is that we can follow the trend of Australian policy, and tread the same path with greater confidence, when our opportunity comes. This does not mean that we are to be merely imitators, following step for step, for we shall profit most by the Australian example if we read it broadly and plan to suit our own conditions. One point especially calls for emphasis, and that is the problem of the overseas debt. There has beer, mention i already of the importance of taking the tide on the flood if colonial stocks are to be converted in London on the most favourable terms. Australia has been watching the situation closely, and it is now announced, without details, that Mr. Bruce has arranged an Australian conversion on the British market. The stocks concerned have a rate of interest in no single instance below 5 per cent, and in some cases as high as 6J per cent. This offers scope for substantial savings, and it is a reminder that we also may be able to benefit, though to a less extent, by an appeal to the British investor. The disadvantage in our case is that we have no large loan's which , reach maturity in the near future, so that any early conversion would be an "act of grace" on Britain's part. The interest level within New Zealand is now 4 per cent, which is one-half per cent below the average on our British debt.