STATE BORROWING.

Auckland Star, Volume LXIV, Issue 247, 19 October 1933, Page 11

STATE BORROWING.

DOMINION'S DEBT. SINKING FUND POLICY. PTJBPOSE WOT FULFILIJED. An opinion in favour of reducing the external debt by raising funds within the Dominion was voiced by Mr. L. W. Holt, lecturer in accountancy at the Auckland University College, in an address to the Auckland branch of the Economic Society last evening. Mr. Holt surveyed the nationa l debt, showing its growth over more than 70 years to a total of £252,000,000, at which it stood to-day, including £00,000,000 spent on productive works, £93,000,000 on unproductive works, £31,000,000 on works which were indirectly productive, £20,000,000 on land settlement, and £42,000,000 on investments. The unproductive debt was made up mainly of sums borrowed for war purpc«es. An analysis of railway finances showed that a substantial part of the railways capital was not reproductive, the speaker estimating the loss in this direction at not less than £40,000,000. New Zealand could take some consolation, said Mr. Holt, from the fact that the debt of other countries was almost entirely unproductive. Under the sinking fund policy adoptei in 1910, and extended in 1925, provision was made for tlie cancellation of a portion of the debt annually, but during the years which immediately preceded the slump the borrowing of New Zealand was adding to the total of debt more rapidly than the sinking funds were reducing it. Thus the benefits derived from sinking funds were reduced to a psychological value, and the purpose which such a system of repayment would be expected to serve was not fulfilled. Eeference was made by Mr. Holt to the need of scaling down the burden of external debt by means of conversions, but he said the scope for saving in the near future was very limited, because the maturity dates, except on several small loans, were at least seven years ahead. He contended that it would be in the economic interests of bondholders in Britain, as well as an advantage to New Zealand, to ease the weight of the existing loar- b t the creditors were not convinced tha x , benefits would come to them for such concessions. Other points considered by Mr. Holt were the setting up of a Public Works Board to • ntrol expenditure in New Zealand, the relative merits of internal and external borrowing as a feature of national policy in a young country, a comparison between taxation and the raising of loans as a means of financing State expenditure and development, and the probablj trend of the capital market in New Zealand in the near future.