MONEY MARKET.

Press, Volume LX, Issue 18152, 15 August 1924, Page 8

MONEY MARKET.

AUSTRALIA ATTRACTIVE. NEW ZEALAND INVESTMENTS. STATEMENT BY MR MASSEY.

(special to "this press.") WELLINGTON, August 1-1. Regarding Mr E. A. Ransome's statement in this House of Representatives vesterdav about an outflow of moner"from New Zealand to Australia, because of the higher interest obtainable there, enquiries made in iinancial circle's here indicate that- the banks are not remitting large sums of money to Australia on their own account, but that certain sums are being- remitted through the medium of the banks bceause"of the higher interest obtainable Enquiries made in the city to-day by i "Post" reporter elicited the statement that something like two mllholl ® had been raised in New Zealand local bodies, institutions domiciled m Australia, and on debentures the principal and interest of which were payable in Australia. The of that interest, of course, represented the passing of a substantial sum in the aggregate of New Zealand money to Australia. The market there was better for the re-employment of such capital ! It was common knowledge that if one could transfer funds from New Zealand to Australia about P",the gilt-edged attraction in that market would be irresistible at 6J per cent, and over An investor domiciled m New Zealand would have to pay income tax but some of the Australian Government investments were free of income tax, and returned up to per cent. The return from the Melbourne Metropolitan Board of Works debentures.with the short currency of ten vears was 6* per cent. Where was a local 'body in New Zealand offering so E ood a rate? It was asked. The New Zealand Government had been trying in vain to force people to advance money on land, instead of fo local body debentures, it was said, and had endeavoured to divert the capital from such debentures to the land by raising the tax on these debentures from 3s to 4s 6d in hut the effect had been to cause the rate of interest on these debentures to be raised m order to cover the additional taxation. In other words, the tax had been passto send quite big sums of money from New Zealand to_ Australia had certainly been made, owing to the better return obtainable there, but it more notes were issued, as was intended, then the currency would foe expanded and money would become cheaper in Australia than it was at the moment. It was pointed out, in connexion with the issuing of these additional n °t<jS, that there was an abundance of giltedged securities held in London by the Australian banks, and these could, and no doubt would, be deposited with the Commonwealth Bank in London, which hi turn could provide an equal amount of currency in Australia for the oanks against such securities. The outcome of the additional currency to be provided for Australia would naturally be watched with great interest here. It might be that money would cheapen there in consequence, and so the attraction of capital from the Dominion to the Commonwealth would be somewhat lessened. After all, question whether there was an excessive or only a moderate outflow of Zealand money to Australia was of not quite so much importance as why New Zealand investors were seeking investments away from home. They had a right to do what they liked with their own ftionoy, and if they could obtain a better return for it elsewhere than in New Zealand it would go.

Mr Masscy's Comments. In the House of ftepresentatwes this afternoon the Prime Minister made reference to the matter. "I have heard it said, and have also read in the newspapers," said the Prime Minister, "that Australian money could be obtained more cheaply in New Zealand than New Zealand money, but it is difficult to imagine such a position. I know that certain local bodies have been able to borrow from Australian interests doing business in New Zealand, but that was not Australian money. I know that money is* going to Australia, but not in large sums. It was a fact, ho added, that the exchange was in favour of New Zealand. "Small sums, though amounting to quite a lot in the aggregate, have been finding their way to Australia for investment, and our own Money Order office is responsible, although it cannot, of course, help itseli'._ I have heard semi-officially that during the last few months a quarter of a million has been sent out of New Zealand to Australia for investment through our Money Order office, and some jsteps should be taken to discourage this practice." It should not be_ forgotten, he said, that we were buying large quantities of wheat from Australia on which exchange had to be paid. The rate of exchange was very heavy and interfered very seriously with business between th& and Australia. There \t®l iust one fact that stood out clearly, and that waa that whatever might be said, money was much dearer in Australia than in New Zealand. He regretted thpt so much money was sent out of New Zealand for coal, especially when it was remembered there was coal in this country to last for centuries.