CONFIDENT AGAIN.

Auckland Star, Volume LXIV, Issue 130, 5 June 1933, Page 5

CONFIDENT AGAIN.

AUSTRALIAN PEOPLE. STRIKING LOAN SUCCESSES. LONDON'S CONCESSION. (From Our Own Correspondent.) SYDNEY, May 30. A little over a week ago the Prime Minister, drawing the attention of the general public to the loan of £5,000,000 then heing put on the local market, pointed out that the whole of the money thus raised is to be spent on public works in all the States. Mr. Lyons added that the Federal authorities had so much confidence in the success of the issue that the banks had not been requested to underwrite any portion of it.

About the same time Mr. A. C. Davidson, in one of the statements issued periodically by the Bank of New South Wales, expressed the opinion that the conditions were far more favourable for flotation than for a long time past, and a little later Senator Massy Greene, as chairman of the Loan Council, confirming Mr. Davidson's opinion, stated that all eerions apprehension about Government finance being now dispelled, investors might be expected to testify their renewed confidence by purchasing Federal stock.

} These high hopes for the success of the loan have not been disappointed. By the ninth day after the issue was opened, the £5,000,000 had been oversubscribed by £800,000, and 110 further subscriptions were accepted. "Simply Wonderful." The completion of such a loan within nine days, especially without any assistance from underwriters, constitutes a Commonwealth record, and furnishes the most convincing proof that the effect of the Premiers' Plan and the agreement entered into between the States in regard to the balancing of Budgets has had remarkably beneficial effects in strengthening public confidence, reassuring investors, and stabilising the financial position, of the Commonwealth.

Naturally the flotation of the loan has been received with great satisfaction in Sydney. Mr. Stevens is much gratified by this proof of restored confidence ill our internal finance. Sir. Dunningham, Minister of Labour and Industry, thinks it "hardly credible" that so complete a restoration of public confidence could have been brought about in so short a time. Sir Henry Braddon and Sir Kelso King congratulated the Australians on thus proving their faith in their country and themselves; and Sir Samuel Hordern regards the flotation of the loan in such a way as "simply wonderful."

Failure Last October. By way of comparison, it is worth noting that at the end of October last an attempt was made by the Federal Government to float a local loan for £8,000,000. The issue closed on December 7 (after five weeks' interval) and the banks which liad underwritten the loan and subscribed 20 per cent themselves, were left with 37 per cent on their hands—the public taking only 37 per cent, or less than £3,000,000. Remembering this, we may -well congratulate ourselves that the investing public, only seven months later, has offered nearly £0,000,000 in nine days to meet the requirements of the Federal Government.

But even more important than the provision of ample funds for public use or the restoration of local confidence in the country's financial position is the effect that this flotation has at once produced upon Australia's financial prestige abroad. Senator Massy Greene, Mr. Stevens and many other public men at once expressed the conviction that the success of this local • loan would facilitate immensely the efforts of Mr. Bruce in London to effect a conversion of Australian stocks at a lower rate of interest. They have not had to wait long for the realisation of their hopes. Within two days after subscriptions closed here it was announced in London that the British Treasury would raise the embargo that it had placed temporarily on the financial operations of the I Dominions, so as to allow Australia to convert a portion of her liabilities. This is a very remarkable concession, because the British Government, in view of the delicate and dangerous international situation, had felt compelled to veto all sudi financial activities for the time being. '

Indication of Confidence. However, the flotation of the loan in record time has evidently inspired the City and the British investing jiublic with complete confidence in Australia, and it is now officially stated that about £11,400,000 of Australian 6J per cent stock is to be converted into 3J per cents at £99. It is true that the amount is not large, nor does-it represent any large proportion of the loans for which Australia is liable, at a high rate of interest. Of the £507,000,000 owed by Australia in London, no less than £357,000,000 carries interest at rates exceeding 4 per cent—including the £11,000,000 of per cents to be converted immediately. But the figures are relatively unimportant when we consider what this generous concession means to the credit and financial prestige of Australia; and this revival of our reputation in the City we owe largely to the succcssful issue of this last loan.