BURDEN OF DEBT

Press, Volume LXVIII, Issue 20463, 5 February 1932, Page 13

BURDEN OF DEBT

THE GROWTH OF BORROWING. CHAMBERS OF COMMERCE

CONCERNED. SPECIAL MEETING TO BE CALLED. The executive of the Canterbury Chamber of Commerce is so concerned at the growth of public expenditure in the Dominion that it has decided to discuss the question at a special meeting to be held a fortnight hence. Mr W. McKay, who introduced the matter, said that the problem had assumed such proportions that it was tho duty of the Chamber to express an opinion concerning it. The people of New Zealand were carrying a big burden, and yet the National Debt was growing constantly, and was now phenomenal, increasing as it was by about £6,000,000 yearly. London Money Market. He drew attention to a statement made to a newspaper reporter on January 6th that the London money market was at present closed to New Zealand in consequence of which the Dominion would have to meet its liabilities from internal resources. Ho (Mr For.bes) stated that he hoped that the London market would be open again soon, but in the circumstances it would be necessary to meet the position locally. '' That shows clearly," said Mr BtcKay, "that had the Government been able to get money in London they would have got it, and will do so again at the earliest opportunity.'' What the Dominion wanted was earned money, he continued; no other money was of any use. In his opinion borrowing had gone on for too long, and it was time that a halt was called. Even the Minister for Finance (the Hon. Downie Stewart) had stated that there must be a tapering off in this respect, and such being the case the speaker thought it timo that the Chamber made an announcement on tho subject. "Borrowing has stopped itself for the time being," said the president (Mr A. O. Wilkinson). A Dunedln View. At this stage of the debate it was decided to read correspondence from the Duncdin Chamber of Commerce on the subject. That Chamber reported having passed the following resolution: — That in view of the difficulty being experienced in meeting the interest on overseas loans and the fear that interest on local loans is proving too heayy a burden . for the country to carry, and also of the fact that there are some who advocate the repudiation of debts already contracted by the State, and that the Finance Minister defended his action in paying interest on Government loans in full more on the grounds of expediency than of business morality, this Chamber is of opinion that any further borrowing by the Government overseas would be reckless, and even dishonest. Local borrowing should be restricted to cover public works to which the country is already committed, but no such works should be continued except those that will be* come interest earning within a short time after completion. £3,000,000 lioan. The Chamber also stated that it had previously communicated with the Associated Chambers in regard to the Government's announcement that a loan of £3,000,000 was being raised, stating that it considered that the Associated Chambers should immediately protest against the proposal. The Associated Chambers, was reported, had sent a reply stating that the Minister for Finance had informed them that he would have to test the market, but that if the Home market were favourable he would have to raise the loan there, as he doubted whether the money was obtainable in New Zealand.

The reply of the Minister being considered unfavourable, the Dunedin Chamber replied to the effect that the Minister's statement that if the Home market were favourable he would have to raise the loan there, was considered to be unsatisfactory. The letter continued: "The burden of public and local body debts is already too heavy for the country to carry, and is growing at an alarming rate. According to the Year Book, the gross Government and local body debt per head of population is £i79 12s5d and £47 2s4d respectively, totalling £226 14s 9d. This is the highest debt per head of any of the British Dominions, and is probably the highest in the world. The public debt per head of population in Australia, according to the Year Book, is £175 Os sd. This Chamber views the matter of borrowing in a serious light, and cannot emphasise top strongly to the Associated Chambers the need for protesting against any furtho* borrowing." Government's Needs. Mr H. M. Chrystall moved that the letter be supported, and suggested that the Prime Minister be asked what he meant when he said that it might be necessary to go to the London market again soon. The motion was seconded by Mr H. S. E. Turner.' Mr V, E. Hamilton said, that the Government would have to raise money at Home to meet renewals of loans, but he hoped that it would not go on borrowing £ 6,000,000 annually. Mr W. Machin said that although the Government had stopped borrowing, local bodies had not done so. It should not be overlooked, he said, that local bodies had the power to borrow without the sanction of the ratepayers, as, for instance, the proposal that Wellington should borrow £50,000 to assist the unemployment position. Then there was the case of the Hospital Board proposing to raise some thousands to meet extra building costs incurred as a result of the earthquake restrictions. It was a delightful position for local bodies to be in—to be able to borrow money without consulting healthy public opinion He thought that the Chamber might be aljle, to sit down and consider a number of proposals to bring before the Economies Commission and the Commission whose function it was to investigate the position of local body administration. Plight of Primary Producers. Mr A. P. Wright said that if the London market were closed the Chamber

should set itself against the Government borrowing local funds, for otherwise there would not be much financial assistance available for primary producers.

Mr J. McGibbon said he wondered if any of the speakers were going to get to the bottom of the position. Who were the local authorities and the Government? he asked, adding that they were no one else but the representatives of the people, who were continually calling on them to spend money. It was the people themselves who were to blame for the present state of affairs. "The answer to Mr McGibbon is," said Mr Turner amidst laughter, "that democracy is absolutely incapable of looking after finance or economics." Mr Machin said that Mr McGibbon's view was absolutely correct. It was the duty of the Chamber of Commerce either to end the matter or to stop talking about it. Mr W. Bottrell said he supported Mr Machin's proposal that the Chamber should devote a night to a discussion of the problem. He moved to this effect. Mr V. E. Hamilton seconded the motion, which was carried, Mr Chrystall, with the consent of his seconder, agreeing to withdraw his motion. Mr A. C. Bretherton said that the Public Works estimates went through

the House in four minutes. He considered that it was a mistake to ÜBe working capital for public works. If it was interfered with there would be no money available for mortgages for a long time, in consequence of which the recovery of the farmers would be retarded. The sooner the public realised that artificial reductions were stifling enterprise, the sooner would there be a recovery. It was decided that the Chamber should meet to discuss the question on Thursday, . February 18th, Mr Machin agreeing to open the debate from the point of view of local body borrowing, and Mr McKay from that of Government borrowing.