OVERSEAS LOAN PROPOSALS

Press, Volume LXXII, Issue 21826, 4 July 1936, Page 15

OVERSEAS LOAN PROPOSALS

Justification Thought Doubtful PROFESSOR TOCKER’S ’ ANALYSIS Arguing that there was nothing new in the proposal by the Prime Minister (the Rt. Hon. M. J. Savage) to seek a lower rate of interest on New Zealand loans in London, before the due date of redemption, Professor A. H. Tocker, professor of economics at Canterbury University College, commented yesterday on the proposal and the criticism of it. He emphasised that such loans were contracts, not between governments, but between the New Zealand Government and private investors in Britain. “The lenders have fulfilled their part of the contract in handing over I the money,” said Professor Tocker, “and thereafter the borrower takes the risk of a rise or a fall in prices. If prices fall then more goods are needed to find the money. “If it is fair for British investors to agree to a reduction of their interest now, it would have been fair, over the period between 1918 and 1929, when prices were high, to increase the rates on New Zealand overseas loans raised before the war, when prices were lower. It has always been that way in any such contract. Had prices for New Zealand exports risen over recent years, New Zealand would not have offered a higher interest rate. Is she justified, then, in asking a lower rate because prices have fallen?” Not Depreciation Alone Professor Tocker replied to the comment in the London “NewsChronicle” that the added costs of New Zealand’s debt service was due to the Dominion having deliberately, "and without Australa’s urgent necessity,” depreciated the value of her currency. Depreciation increased the cost in New Zealand currency, he said. But there was a further big increase in the burden of the overseas debt, and in the fact that prices had now fallen and that more goods were now required to be shipped to realise the amount needed for interest. A reason for the falling off of New Zealand imports from Britain was that a great part of the proceeds of exports had to be devoted to •debt and shipping services, and what was left would buy fewer imports than before. He added that many attempts had been made at the time of the World Economic Conference, by other countries, to secure a permanent reduction of interest on external debts—by countries whose position was worse than that of New Zealand, and at a time when, world conditions were far worse. Remissions of interest had been arranged, but permanent reductions had been out of fee question j PRODUCTION AND INTEREST FURTHER STATEMENT BY MR SAVAGE i CALL FOR “COMMON SENSE” (PRESS association telegram.) : WELLINGTON, July 3. i Commenting further on the Government’s altitude toward its overseas obligations, the Prime Minister (the Rt. Hon. M. J. Savage) in an interview, emphasised the point that the more New Zealand paid Britain in the way of interest on loans, the less New Zealand would be able to pay to Britain for her manufactures. “A child will see that,” said Mr Savage. “At a given time, there is only a certain amount of production in New Zealand, and we export a large percentage of that; and I again say emphatically that the more that goes away in the payment of interest, the less New Zealand will have for the payment of services given I by Britain.. It is in Britain’s own ; interest that there should be com-1 ipon sense reigning in the industrial and financial world. If the interest bill was not as large as it is, the difference would go to Britain for the products of the labour of British workmen! By that I mean that there would be a better distribution of the money paid. We have no desire to side-step our responsibilities either in New Zealand or abroad. The only question for consideration is that of more equitable distribution, and that applies to Britain just the same as to New Zealand.” COMMENT BY LEADER OF OPPOSITION new ZEALAND’S HONOURING j OF OBLIGATIONS (PRESS ASSOCIATION TELEGRAM.) | WELLINGTON, July 3. Commenting on Mr Savage s over-; seas interest statement, the leader; of the Opposition (the Rt. Hon. G.; W. Forbes) said lie could not for a moment think repudiation was intended because that was utterly opposed to all that political parties had stood for in the past—namely, the honouring of obligations to the Homeland as long as was humanly P °During the depth of the depression, there might have been sonic justification for asking for some relief; but that had not been done because they recognised that the bondholders were suffering, from the same cause. To suggest, or almost demand, a reduction in interest when the country was in a prosperous conation was unthinkable. He hoped Mr Savage would make it clear that he dfd nltMntend that, and that New Zealand would honour its obligations.