The Press MONDAY, MAY 25, 1953. National Development Loan

Press, Volume LXXXIX, Issue 27048, 25 May 1953, Page 8

The Press MONDAY, MAY 25, 1953. National Development Loan

The terms of the 1953 National Development Loan of £20,000,000, which opens tomorrow, should prove attractive to investors. The Government hrs recognised, as the Associate Minister of Finance (Mr Bowden) recognised when speaking at the Dunedin conference of trustee savings banks, that “3 per cent. “Government stock is a thing of “the past”. The interest rate has been fixed at 3f per cent, to preserve a margin between Government and local body short-term loans. But the interest rate for the new loan is only nominally 3J per cent., the issue price of £9B 10s giving a return of £3 19s per cent. Concessions included in the terms of the National Development Loan will make the loan more attractive to some than short-term local body stock at 4 per cent. Two notable concessions are the extension of the right of an executor of a deceased estate to use death duty stock in payment of income tax and social security charge, as well as death duties, and the provision to grant a rebate of income tax to investors to ensure a minimum net return of 2 per cent. The second provision will be an inducement to investors in the higher income groups whose combined tax exceeds 10s in the pound. The term of the loan—nine years—meets the wishes of most contemporary investors to keep their funds as liquid as possible, though the maturity date—l962—may cause repayment or conversion difficulties, because another big loan matures in that year. However, in the 1960’s big loans will mature in most years, and 1962 has evidently been deemed the most suitable for maturity of the present loan. The need for the loan hardly needs to be emphasised. It is partly a conversion loan, but chiefly a loan to be used for capital works for national development. Many projects necessary for New Zealand’s proper development are retarded for lack of capital. No doubt it will be necessary to draw on external loan sources fully to meet requirements. But internal sources should be drawn on first; and if the full subscription of the loan demonstrates the New Zealand investors’ faith in the future of their country, it will undoubtedly encourage the overseas investors who may be approached later. There is another good reason why investors should support this loan. The present Government has shown a tendency,to tax more heavily than its current spending requires, and to use the surpluses for capital projects. That is a practice about which neither investors nor general taxpayers can be happy; and they have every reason to remove the need and the justification for it by providing the Government, on terms reasonably favourable to the lenders, with the loan money it needs for national development works. The loan and its purpose should need no commendation to investors.