PUBLIC DEBT

Press, Volume LXXIV, Issue 22459, 21 July 1938, Page 13

PUBLIC DEBT

DECLINE DURING YEAR NO NEW FUNDS RAISED OVERSEAS WELLINGTON, July 20. A reduction of more than *£4,000,000 in the Public Debt of New Zealand at March 31 last, compared with 'the position 12 months earlier, is claimed by the Minister for Finance (the Hon. W. Nash) in his Financial Statement, presented to the House of Representatives this evening. No additional funds were raised abroad during the year, and all Treasury revenue bills issued during the year were redeemed out of revenue by March 31, 1938. The loans raised by the Government during the financial year totalled £7,454,897, and redemptions of debt amounted to £11,836,805, resulting in a net reduction in the total public indebtedness of £4,381,908, the Minister Details of the loans raised during the year are:— £ Public works, including main highways and State forests 5,851,526 Housing . - • • 1,600,000 Raised for redemptions but not applied as at March 31, 1938 , ... .. 3.186 Premiums on conversions .. 180 / i £7,454,897 “The amount borrowed under the first item, together with balances carried forward from the previous financial year supplemented by available revenue resources, was used in financing the works programme for 1937-38. “The finances of the Housing Account are, in terms of the relative act, adihinistered by the State Advances Corporation, and a review of the transactions lor the year, together with a balance-sheet, will be found in the annual report of the corporation to be presented to Parliament shortly.” Redemption Funds Funds for redemption purposes were obtained from the following sources:— £ Public Debt Repayment Account .. • • 1»713,811 Sinking funds .. • • 166.664 Other accounts .. •: 6 j 330 Sale of State Advances Corporation stock, representing investments of— Loan capital ... 3,250,000 Public Debt Redemption Fund 4,000,000 Deed of hypothecation over discharged Soldiers’ Settlement Account mortgages 2,700,000 £11,836,805 “The first three items in the table just referred to cover what might be termed ‘normal debt repayment operations.’ Under-the Repayment of the Public Debt Act, 1925, funds are provided from the Consolidated Fund each year for the repayment of debt. The last three items, under which funds for redemptions amounting to £9.950,000 were derived from the sale of State Advances Corporation securities, represent special operations arising out of the transfer of mortgages to the State Advances Corporation pursuant to the provisions of the original Mortgage Corporation of New Zealand Act, 1934-35, and the consequential liquidation of the old State Advances and the Discharged Soldiers’ Settlement Accounts. “Formerly the transferred mortgages were investments of moneys borrowed and forming part of the public debt, and of moneys from the Public Debt Redemption Fund. This fund was constituted under the Repayment of the Public Debt Act, 1925, of some closed sinking funds and certain amounts transferred to the Discharged Soldiers’ Settlement Account from the Consolidated Fund. “In addition, the mortgage investments of the Discharged Soldiers’ Settlement Account were covered by a deed of hypothecation under which the amount due at March 31, 1937, was £2,700,000. When these mortgages were transferred to the newlyconstituted State Advances Corporation in exchange for stock, it became possible to sell £9,950,000 of this stock and to apply the proceeds in repayment of an equivalent amount of the public debt. In this way tjje deed of hypothecation was extinguished and other public debt to the amount of £7,250,000 was cancelled. Realising Investments “In essence, the operations were exactly the same as though investments of any sinking fund were realised, and the proceeds utilised to extinguish the debt-against which the sinking fund was held.. It may be added the reductions in the public debt thus effected were not all clear gain in that the interest saving on the debt repaid is largely offset by the loss of interest on the investments realised. . “No additional funds were raised abriad during the period under review, the policy of the present Government being to repay external loans as quickly as possible and to. restrict borrowings to amounts required for conversion purpose*. The effect of such a policy is reflected in savings in overseas interest charges. Thus for the year ended March 31, 1936, the total cost under this heading amounted to £5,837,000, whereas for last financial year the comparable expenditure was £5,341,000, a reduction over the period of two years of no less than £496.000 a year." Rural Advances Bonds issued under the provisions of the Rural Advances Act, 1926, were secured upon the assets of the Rural Advances Branch of the old State Advances Account, and did not form part of the public debt. As part of the liquidation of the State Advances Account, Rural Advances Bonds to the amount of £4,213,050 were made part of the public debt, but this was purely a technical adjustment and in no way increased the obligations of the Consolidated Fund. Comparison With Previous Year “The public debt as at March 31, 1937, as shown in last year’s Financial Statement, was £287,670,200. The deed of hypothecation over Discharged Soldiers’ Settlement Account mortgages amounted to £2,700,000. Rural Advances securities toti “ le s £4 213 050 If these debts are added to the public debt as, shown in last year’s Financial Statement, the total will amount to £294,583,250.” The reconciliation of the debt as shown for the respective years is given as/follows;-^- £ » public debt as in 1937 Financial Statement .. 287,670,200 Deed of hypothecation over D i s c h arged Soldiers’ Settlement securities .. 2,700,000 Rural Advances debentures & scrip certificates • • 4,213,050 Repayment during 1937-38 11,836,805 Loans raised 1937-38 .. 7,454,897 Public debt as at March 31, 1938 .. £290,201,342 The domicile of the public debt as at March 31, 1938, was as follows: £ London .. .. 156,857,016 Australia .. .. 882,600 New Zealand . • 132,461,726 £290,201,342