FINANCIAL ROCKS AHEAD

Press, Volume LIX, Issue 11279, 21 May 1902, Page 5

FINANCIAL ROCKS AHEAD

TO THE EDITOR OF THE PRESS.

I Sir,—Your article under. tbis (head, in your issue of the 14th inst., is well-timed, [ and must (have impressed your readers of the necessity for greater attention to the financial position of the colony, than it has been receiving. Sir Dillon Bell's forecast of, the indebtedness, of the Australasian oolcnies in 1900, '__ad. by him in-1882, shows clearly how much worse is the position of these colonies than was then thought probable, and it will bear repeating. He anticipated a population of 7,000.000, whereas it is only 4,600,000. a little over one-half. He anticipated a total revenue of .50 millions and a commerce of 270 millions, whereas the actual figures are only 54 millions and 161 millions. Again, the per capita debt was expected to st_i__ in 1900 at ISO millions sterling. Instead, it stood in 1900 at 243 millions. The figures are therefore much worse in every direction than Sir Dillon Reil, a trustworthy and talented statesman, had anticipated. Our public indebtedness is increasing every year, and the position is grave enough to command the attention of every patriotic New Zealander. There are feature, in it that take it out of the sphere of politics, and should permit of its discussion regardless'of party. The present public debt -stands at £48,557,751, and the annual oharge for interest to ba paid in London is £1,875,530, or an average rate of £3 15s 7_"per cent. In order to pay its way the colony has, thertfore. to expoit _ surplus, of its products to pay this sum. unless it realises enough out of exports to pay for imports, and also to pay this £1,875,530, tlie colony must, bs gomjg ba .kward.. But this _* not all. There still remain the private debt, due to London. 'Jibes, are loans to lecal bodies, £4,478,300 (N.Z. Handbook, 1901, p. 196), and private debts estimated at £14,000,000. These added together increase the colony*- debt by £19,478,300, say, 19J- millions. If we calculate interest upon this at 4__ per cent., it.make, the interest pavaible abroad f.r private debts £877,500 * The total foreign liabilities of the colony are, therefore, approximately £68,036,0.1, and tbe interest to be paid on them £2,753,030. Since 1893 there has been a .all in.'the rate of interest upon good> mortgages, fiwn 8 per cent, .to 5 per cent. In the psriod, 1870 to 1881, not only did England lend us large sums publicly, she also sent out an immense amount of* money through companies, which borrowed in England, upoli debentures secured on their capital at"4 per cent, interest, and lent the money out here at 8 per cent. ' Since tlie drop in rate, of' interest on mortage in 1893.-th it* - money is being recalled Home as quickly as '.possible. The colony has), therefore, to find not only enough to pay- __. before-meii-tioned £2,753,030, but also any withdrawals of capital by these English money-lending companies. There is only one legitimate way for tis to pay our debts, that is, to pay 'them in exports. Since 1893 we have exported, up till. 1900, £81,058.161, and. imported £60,662,380 worth of goods. .There ". i_ therefore a credit balance for the period of £20,395,781 to meet tha interest on public and private debts, and withdrawal oi Home capital. The public and private interest debts, 1893 to 1900, total £20,326,000, so that there is no surplus to represent the foreign capital being withdrawn since the fall in interest. If we do not pay our foreign debt, out of exports, then there are only -two other ways of settling them. We may add the debt to the principal, which is, I believe, what we are doing, or we may remit gold. If we did the last, it would speedily bliow itself in tbe Bank reserves. ' What seem, to wont inquiry is the question as to wthat has caused interest to fall since 1893. If : interest rose to the old level, the induce- ■ I ment to withdraw foreign capital would be gone. The question is, bow can it be done? You dram* attention to the increase in tibe expenses of Government It is dear ! that all tbe colonial G_.tfe__m.nt_ must considerably reduce their expenditure" while colonial products remain at their present low level. None of them ©am be paying th ear , way since the fall in the rate of interest | and withdrawal of Home capital. Trust? 1 ing you may find room for t___ letter, and with apologies few its length.—"fours, etc., I DONALD REID, Junior. Dunedin, 17th Ma?, 1902.