FINANCE AND COMMERCE

Press, Volume LXXV, Issue 22767, 20 July 1939, Page 13

FINANCE AND COMMERCE

DOMINION’S ECONOMIC PROBLEMS LONDON CONVERSION DIFFICULTIES (prom our own correspondent.) LONDON, July 3. New Zealand s credit and the problems confronting the Minister for Finance (the Hon. W. Nash) in converting the £17,172,191 of 3p per cent, stock are reviewed by the “Economist.” After saying that it is impossible to withhold a certain sympathy from Mr Nash, the “Economist” states the present Government “is certainly not to blame for the fact that an amount to nearly £lO a head of the inhabitants of a country with a population of slightly more than 1,500,000 falls due for repayment at a single date.”

The operation is comparable with a British Government conversion of , £500,000,000. Failure to provide an alternative date before final maturity in New Zealand’s case has, the “Eco- . nomist” continues, “saddled the Do- - minion with the necessity of meeting a heavy obligation at a moment when 1 market conditions could hardly be more ■ unfavourable. “Interest rates have risen and over- , Beas capital investment is frowned on • by the British Government, which has it i( S own reasons for holding potential competitors off the market. Meani while changing political tendencies in f the pacific have modified the British j investor’s traditional appraisal of New • Zealand’s external problems, and simultaneously increased the need for ar- | mament expenditure. Share of Responsibility "All .this is less New Zealand’s fault than her misfortune. But some share ‘ of responsibility for the changed attitude of the London capital market toward New Zealand stocks must be laid at the door of the Dominion’s own economic policy.” Comparing quotations for stocks with identical interest i rates and'roughly comparable lives, it i is shown that, while all gilt-edged prices have fallen since the autumn of 1935, the decline in New Zealand’s issues has been greater than for either British Government or Australian stocks, and the yield differential has widened considerably. Analysing the attitude of the British investor toward New Zealand, it is stated: “In general, it is always In the investor’s interest that countries in which he is financially interested should enjoy as high a standard of living as possible, if only because a prosperous borrower is the best of credit risks. “Die investor, as such, has little concern,: with party labels and less with class distinction. He is interested less in policies than in their results. He has long recognised a-peculiar and welcome intimacy in the Imperial link between New Zealand and this country, and he does not question the constitutional fight of its sovereign government to, pursue whatever economic and:social policy is desired by a majority.dfthe people. Nor, equally, can he oveatopk the fact that the results of that poliKvi* so far as they have impigned on nis own special interest, have been unfavourable.” “Empty Locker" Prospect Alter reviewing events in New Zealand since 1935 and the fall in sterling funds, the article adds: “The moment is riot far off when the prospect of an empty locker may have to be faced. “The surmounting of the immediate difficulties will not impress the British investor unless he is convinced that they will not recur every year. And that depends on the future course of the whole economic policy of the New Zealand Government. Mr Nash has'defined New Zealand’s policy as ‘insulation, not isolation.’ But investors' may be sceptical of the extent to which ‘insulation’ is feasible for a country .whichhas socialised in meat and dairy produce for export, whose foreign trade a head has been for years the highest of any country in the world, and whose national income must be profoundly affected by the amount which the United Kingdom (which took 76.3 per cent, of New Zealand’s exports m 1937) is willing

to absorb and the price it is prepared to pay—with due regard to the fact that the British Government Is now squarely embarked upon a policy of fostering its domestic agricultural production. “Failing a complete reversal of the Savage Government’s expansionist policy, some reduction of New Zealand’s imports below the current level is inevitable if default on external debt is to be avoided. That result might be attained either by a further depreciation of the New Zealand pound or by direct import restriction on more effective lines than those followed hitherto. Currency control is an expedient which the City of London can scarcely be expected to welcome in itself, while restriction of New Zealand’s purchases from abroad must be even more distasteful to British exporters. "Whatever the letter of the Ottawa agreement, it would be hard to justify the argument of the Federation of British Industries that New Zealand is, in effect, a tied house' of the Mother Country, with a prescriptive right to sell a specified minimum quantity of its products there every year. Thi import licence regulations have been drafted so that the United Kingdom proportion of New Zealand’s total imports cannot decline and is almost certain to increase. Moreover, Mr Nash has declared that the New Zealand Government is willing to spend the entire balance from the proceeds of its exports to Great Britain, after deduction of the external debt service, in purchases from this country. Beyond that, in these times, it may be difficult to ask any government to go. Most Practical Way Out "So far as the immediate question of New Zealand’s ■ £17,00X1,000 debt maturity is concerned, the most practical way out would seem to be the granting of facilities for the offer of conversion stock in the London market, including underwriting arrangements, etc., ori the best terms the Dominion can secure from the investor. It has been made clear this week that there is no question of a Treasury guarantee for New Zealand borrowing. "This is hardly a time when the damaging consequences of acute disagreement between Great Britain and the Dominion can be contemplated. But the terms of the conversion must be entirely voluntary, and the repercussions on New Zealand’s external credit of her Government’s policy must find due recognition in an enhanced rate of, interest —possibly 5 per cent. For the rest, friendly but firm representations from London to New Zealand will not be out of place, regarding the ultimate dangers of a policy of ‘insulation.’ Here, the British Treasury, although •it has no clear locus standi, may at least recall a relevant precedent. New Zealand Government loans are trustee stocks under the Colonial Stock Act.

“The British Treasury Is specifically excluded from financial liability under that act, but it Was deemed advisable!, in Newfoundland’s case, to give special treatment to trustee Issues, at the expense of the British Exchequer, rather than to allow default to occur. The British authorities may well urge the New Zealand Government not to confine itself to mere .declarations of determination to maintain its debt service, but so to frame its policy that danger will never arise. Ultimately, those who will the ends must also will the means.”

LONDON WOOL ! ] ■SALES 5 1 - i ' 1 Rates Generally j Maintained | : _ 3 AVERAGE SELECTION 3 ( MEETS KEEN DEMAND 3 (Btll'l-Jiu PRESS ASSOCIATION—COPYRIGHT.) LONDON, July 18. At the wool sales, 8037 bales were offered, including 3232 New Zealand, and 6578 > .were sold. An average selection met a spirited demand, especially for greasy crossbreds and greasy merinos. Rates were generally well maintained. Slipes were freouently withdrawn owing to unsuitable lengths. New Zealand greasy crossbred. Tarndale, geld from 9d to ll|d| slipe cross-bred-combing lambs, GRC, 14Jd. PRIVATE PURCHASES IN SYDNEY feRKSHIRE AND THE CONTINENT DEMAND for lines showing ATTRACTIVE DEPTH Yorkshire and Continental buyers been active private purchasers of scoured, - fellmongered wools of late. A iair inquiry has also prevailed for passed-m greasy lines, Japanese buyers those seeking Supplies, ® a .y Wmchcombe, Carson. Ltd., the SydneZ brokers, in their latest report. remand has been strongest for lines snowing attractive depth. A mere than exists between the prices obtained for good length scourandvthe- shorter classes, the difi?~ ce P? value being 3d to Id per «»ore than normally. preference for the longer length JlPPfs is due to their unusual scarcity. J'Tought oyer a larger area. of Ausresulted in a larger proportion last season’s clip beirig shorter man Usual. fact that buyers from a number countries are seeking the J*™ giv&s reason for faith in °f its marketing. Artificial caia n °t prevented its ready ririno ni? lr ehief menace is one of S,, The people in Germany. Japan, which are financially, commercially aqd industrially under strict

Government control, cannot use wool With full freedom If the authorities rule otherwise. From the monetary Standpoint the higher the price of wool the less of it they can buy. That aspect must be kept in mind when considering the possibility of a substantial advance in prices. Business in Yorkshire Yorkshire establishments have been much more actively employed in recent months. Latterly turnover in merinos has revived considerably. Larger orders for civilian goods have been received both on export and home account. An earlier revival of the latter was expected because of the increased employment and greater spending power of the people following the Government’s special defence expenditure. Time was necessary, however,' for that money to make its presence felt in the clothing trade. .Apparel ranks next to food as a Human necessity, but it is doubtful if the same proportion of income is spent On clothes as was spent years ago. Motor-cars, picture shows, and other forms of entertainment now take an increased quota Of income. Men’s clothing at least is made to last longer. The remarkable growth in the number of establishments cleaning and pressing clothes in the world’s cities provides evidence of the desire to use apparel to the utmost. „ . The l world’s wool, however, still finds users. There are more people to use it than years ago. We have no fears of the sheep’s staple failing to find buyI ers. The great need is to secure values for it in better relation to Australian costs of production. Until Japan is able to buv with much increased freedom a marked rise in prices does not look probable, but selling prospects are certainlv brighter than at this period of 1938. The new Australian selling season opens in Sydney on August 28.

LONDON METALS MARKET COPPER, LEAD AND SPELTER HIGHER

WAR* LOAN HIGHER (BRITISH OmCI&L WIRELESS.) RUGBY, July 18. British War Loan is quoted at £92 16s 9d, an advance of Is 3d.

RECORD .NET PROFIT GENERAL ELECTRIC’S YEAR IMPROVEMENT IN EXPORT BUSINESS DEVELOPMENT OF COMPANY’S PRODUCTS Keen satisfaction with the results achieved in the last year’s trading by the General Electric Company, Ltd. fthe G.E.C.), was expressed by Lord Hirst of Witton, chairman and managing director, when addressing shareholders at the annual meeting in London on June 29.

“I honestly thought last year when addressing you that we had reached a peak that required some time to reac hagain.” said Lord Hirst. "The outlook was not too encouraging, and the previous year had a number of characteristics which affected our company very favourably at the time. However, I am here once more, submitting results beyond our expectations. "Net profit totalling £1,776,000 was just £4OOO more than last year, and a new record in the company’s history. The home business has kept up remarkably well. We have, of course, benefited by Government orders, but they have Still played a comparatively minor part in our total turnover. I would like to emphasise, as I did- last year, that profits on Government work are not the extravagant figure that seems to exist in public imagination. “We have again done well in export and exceeded last year’s figure, which was a record. This achievement is not due to any particular country or to any lafge contract, but is spread over nearly all our overseas markets, and nearly all departments. Our overseas market is mainly within the British Empire, which absorbs more than 80 per cent, of our exports. Foreign Markets Closed “Many foreign markets are closed to as by high tariffs, while from others we are excluded by patent or trading agreements. It is interesting to record that our principal customer was again South Africa; next came Australia, then India. All our' overseas branches have done well, and nearly all have contributed to our profits, except China, and even there, in spite of the conditions ruling, the figures have shown a great improvement on the previous year. In general, the bal-ance-sheets of our overseas companies are in a sound and healthy condition. “The trend for countries all over the world to become self-supporting has increased, particularly during the last year, and the desire to start secondary industries has especially flared up in our Dominions. For many years we fought against starting factories abroad, but circumstances are .so strong that we are to-day forced to study this question carefully if we do ndt wish to lose the footing which we have obtained in Empire markets. "Yet we are hammering away as best we can in other parts of the world, and in some cases where the Government has offered support to foreign countries, like Turkey, we have found a satisfactory opening for doing business. Successful Turbine Construction

“As regards our heavy engineering activities, it may interest you-to know that at Fraser and Chalmers, our mechanical engineering works, we continue with the successful construction of an ever-increasing number of turbines. At the moment, seven of those going through the works have capacities of 35,000 k,v.a. at a speed of 3000 r.p.m. They find their way into all parts of the British Empire. An ever-increasing amount of electrification of works and factories is taking place. Our group of engineering works at Witton, on the electrical side, keeps pace with this development through the production of generators, motprs, switchgear transformers, rectifiers, and traction equipment. “Naturally, as electrical development never, stands still, new requirements, which experience has shown to be necessary, have had to be met. These have had for their object the increase of system stability, that is to ensure that the electric supply is maintained as completely as possible when short circuits or such like disturbances take place. To this end, much quicker acting circuit-breakers are now required than was thought necessary at first. Much work on these lines has been done in our high power test laboratory at Witton. “As regards large transformers, 1 can also record good progress. I am particularly pleased that we are holding our own in the overseas transformer market. ... “Large electrification contracts have been obtained from British railways and for installations as far apart as Perth ' (Western Australia), Buenos Aires, Copenhagen, and Spitzbergen. We have been particularly successful in the construction of electrical equipment for trolley buses, which we have sent to all parts of the world. “Equally sb, we have reason to be proud of our success in the electrical equipment of ships, both for light and power, both Jor the Admiralty as well as for the mercantile marine. Telephones and Radio “Our telephone works have been engaged to their full capacity throughout the year. The progress of mechanisation of the British telephone service has again made signal headway, and this same feature has been no less remarkable in the colonies and dominions overseas. , ..... “Your company’s activities in the field of radio communications are also worthy of mention, and a comprehensive range of ultra high, frequency transmitters has been brought on to the market. Another of our pioneer researches initiated some years ago is bearing fruit, i.e., the generation of Very short radio waves. The new valve developments we then undertook have put us in a position to take part Very actively in important developments in this field of radio. “The confidence which, for many years, your company has held in the future of television, was fully confirmed by the great increase in public demand experienced since last August. The public are now realising that television is no longer an experiment, but an established factor in everyday life. Your company is well equipped to take an important place in all fields of radio and television activity, apd I believe that success in these markets will have a definite influence On our future. Improved Lighting- Forms “We are constantly endeavouring to improve the already excellent quality of our lamps, and have succeeded in continuing to hold, both in quantity and quality, our outstanding position in the lamp industry of the British Empire. “It is some years since I first mentioned to you our pioneer work on the how familiar mercury vapour electric discharge lamps. The study of these mercury lamps and of florescent materials has since then formed the subject of very energetic investigation by our research workers. We see them coming into use for many purposes; in both concentrated and tubular forms for factory and other interior lighting, in highly concentrated forms for obtaining brilliant beams of projected

light, as well, as in improved forms for street lighting. “The yellow sodium vapour lamp has its advocates for street lighting, and we have taken care to meet this demand wherever it exists on a par with any other manufacturer. Business in general lighting and domestic commodities has been somewhat affected by the crisis, though the outfall has been made up by orders in other departments.” , , „ . , Lord Hirst proceeded to refer in detail to the activities of the associated and subsidiary companies of the G.E.C., all of which, he stated, had maintained a foremost place, in spite of the keenness of competition. A number were engaged in some work for the Government. In this connexion he said that though such a company as their X-ray business, Watson and Sons, manufacturing in England, would be essential in the event of war, they were discouraged by the amount ot business which was placed abroad, particularly in Germany, by hospitals and public institutions.

Changing Business Conditions “I suppose you would like me to say something about the continuity of this work or what we think of the future,” continued Lord Hirst. “The reply to that question is treated by many people very simply—either by ■saying it depends on the international situation or on the Stock Exchange, or by the defeatist saying—‘slumps and booms must follow each other.’ I personally think that too few people realise the changes that are going on in this post-war world. I ignore, for the moment, the international situation, and consider the future depends on our power to adapt ourselves to changed and changing conditions in our business and industrial lives. “If our friends in the Dominions think they must manufacture —and this desire has received an impetus by the needs of defence —let us link up with them with our capital and skill in all such industries which their sparse population can absorb. It will strengthen our influence against foreign competitors, and, as there are so many things which they cannot successfully manufacture, it may well be that our total export to them will not dwindle; it may even increase. “I could go on pointing out a number of changes which have happened in this post-war world: I am not competent to suggest remedies, unless the world is' prepared to sit round a table, study iointly in a friendly manner the conditions harmful to freer world exchange of goods, and try to find means to ameliorate them. In the meanwhile I know only one thing, that we must make every effort to increase our wealth by higher production. At the same time, we must not only think of improving our machines, but also the standard of mental equipment and living conditions of our people. Your company is doing Its best to work in this spirit. Outlook Still Hopeful

“In spite of all these difficulties which I have enumerated, there is still a strong streak of optimism in my veins concerning the future. Given that there is not going to be an international flare-up, I feel the strong financial position of our country, the present good employment figures which mean an increase in the purchasing power of our people, the contribution of the Government to our productive programme, apd our improving export figures, all these things convince me that we can look with confidence to the future, provided our costs of production are not unduly further burdened by unreasonable demands on industry. “The General Electric Company, Ltd., of England, known throughout the world as the G.E.C., is represented in New Zealand by British General Electric Company, Ltd., Wellington, Christchurch, Auckland. Its Issued share cap’ital amounts to some £7,300,000. and its annual trading profits have exceeded £1,000,000 for. several years. It has some 40,000 employees, whose annual salary and wages amount to £3,600,000’. The dividend on the ordinary capital is 10 per cent., plus cash bonus of 10 per cent., the same as in the previous year.” —P.B.A.

MINING NORTH BROKEN HILL INCREASED PRODUCTION IN LAST TWELVE MONTHS Increased production is shown by several leading Australian metal producing companies in the year ended June 30. The higher output should partly offset the generally lower prices for the various metals which have ruled in the last 12 months. Production of North Broken Hill. Ltd., in the year ended June 30 showed a further considerable gain. The lead content of concentrates produced annually has risen by about 17 per cent, in two years. The amount of silver produced in concentrates also has risen appreciably over that period and zinc is up by about 20 per cent. Following is a comparison of lead and silver contents of lead concentrates and zinc content of zinc concentrates produced in each of the last four financial years;—

An important feature of the company’s operations in the last 12 rrfonths was the bringing into commission on April 11 of a new concentrating mill. ELECTROLYTIC ZINC Production of zinc at the Tasmanian works of Electrolytic Zinc Company of Australasia, Ltd., in the year ended June 30, was maintained at a level slightly in excess of that of the preceding year. Lead and silver contents of product shipped at Port Pirie for realisation also increased slightly. The output of the works for the last three financial years was as follows: — 1937. 1938. 1939. Zinc, tohs . . 70,082 69,718 60,825 Lead, tons .. 2,266 2,772 2,873 Silver, 02. .. 389,480 360,450 437,550 About one-third of the requirements of zinc concentrates is generally supplied by the company’s West Coast works in Tasmania, GREY RIVER The Grey River return to July 18 is 2670 z from 94,681 yards dredged in 133 hours. ;■ >. LONDON BUTTER MARKET SLOW NEW ZEALAND DOWN TO 125/LONDON, July 18. The London butter market is slow. Choicest salted and unsalted; New Zealand, 125 s (a reduction of Is); Australian, 116 s, *

LONDON, July 18. July 17. July 18. £ s. d. £ s. d. CopperStandard, spot 42 13 14 43 1 104 Forward 43 0 V* 43 8 14 Electrolytic .. 48 17 49 5 6 0 49 2 49 10 b 0 Wire bars .. 49 5 0 49 10 0 Lead— 14 19 44 Spot . • 14 15 74 Forward 14 18 14 15 1 3 Spelter— Spot • • 14 4 44 14 6 104 Forward • .. 14 8 14 14 10 74 Tin--229 18 229 18 9 9 Forward 225 3 9 225 3 9 Silver— Standard, per 163d 16?d oz. Fine, per oz. 18 l-16d 18 l-lou

Lead. Silver. Zinc. Tons. Oz. Tons. 1936 ,. 58,412 3,254,214 40.872 , 1937 .. 59,380 3,312,534 80,125 1938 .. 64.092 3,546,765 42,900 1939 .. 69,866 3,797,693 47,107 ■ Average sterling quotations for the last three financial years of metals produced by the company compare as follows;— 1937. 1938. 1939. £ b. d. £ s. d. £ s, d. Lead, ton 28 1 3 17 9 6 14 19 5 Zinc, ton 19 18 1 16 13 4 14 0 2 Silver, fine oz. 0 1 9.9 0 1 9.2 0 1 9.4