Dominion’s Debt To Britain ?

Press, Volume LXXXIII, Issue 25274, 28 August 1947, Page 6

Dominion’s Debt To Britain ?

In the House of Representatives last night the member for Lyttelton took for granted the general assent of both parties to the Government’s policy of repaying the present debt to Britain. In normal conditions it would be a sound policy, and Mr Nash has probably earned a more unanimous applause by his successive steps to repatriate oversea indebtedness than by any other of his sustained financial poll-;

cies. But his continuing in this course now is not so easily approved. The Financial Statement showed that Mr Nash faces three early maturities in London. The first, in September, is for a very small amount, and there is no need to say anything about his decision to pay it off. The two others are of large amounts: £14,000,000 maturing in November, and £24,000,000, which the Government will have the right to redeem on or after March 1 next year. “As these loans “ carry interest at 4£ per cent. ”, Mr Nash - said, “it is obviously to our “ advantage to deal with both loans “this year; and arrangements are “ now in train for this purpose ”. It will be noted that Mr Nash did not clearly say that they would be repaid; merely that they would be dealt with, which may, of course, as well mean conversion as redemption. But it is certain that Mr Nash was widely understood to be speaking of redemption, probable that he meant redemption, and necessary to observe that redemption may be a bad mistake. These loans could not be redeemed without heavily reducing New Zealand’s sterling balances. But it would not benefit Britain to have these sterling claims reduced and to recover the sterling capital equivalent. Britain has asked the Dominion to use the utmost possible restraint in exercising sterling claims and to allow them to accumulate if possible, which is a very different thing and on the long view a much better thing. In two or five or 10 years it may well be as much to Britain’s as to the Dominion’s advantage to have the largest possible pool of sterling purchasing power available. Repaying these loans now is from that point of view hasty and imprudent. Conversion is correspondingly to be preferred. Besides, the sterling transactions to repay these large amounts would have to be paralleled and covered by transactions in New Zealand. There is no hint of them in the Financial Statement, but Mr Nash would either have to raise a public loan, or to use the banking system to the same effect, or to raise the moiiey by taxation; or he could combine these devices. They have only to be analysed with a little care and very serious objections are disclosed. Mr Nash’s intentions should be more explicitly stated and closely examined as the financial debate proceeds.