Government Expected To Borrow £25Million

Press, Volume XCIX, Issue 29388, 15 December 1960, Page 16

Government Expected To Borrow £25Million

(New Zealand Press Association)

WELLINGTON, December 14. The economic committee of the Cabinet spent nearly two hours this afternoon preparing submissions to be njade to the full Cabinet on Monday detailing steps to meet the deficit of £25 million expected in the Public Accounts to March 31. The Prime Minister (Mr Holyoake) said the committee comprised the Minister of Finance (Mr Lake), the Minister of Customs (Mr Marshall), the Minister of Labour (Mr Shand), the Minister of Defence (Mr’ Eyre), the Minister of Agriculture (Mr Gillespie), the Minister of Internal Affairs (Mr Gotz), the Minister of Education (Mr Tennent), the Parliamentary Undersecretary to the Minister of Finance (Mr Seath) and himself. Mr Holyoake made no disclosure of the steps the Government had in mind to meet the situation, but the Wellington correspondent of “The Press,” says the course most likely to be followed —and almost at once—will be an internal loan of between £8 million and £lO million, a London loan of £lO million and a loan of £5 million from New York.

This, it is understood, was the Treasury’s advice to the Labour Government, in its last days of office. Preliminary arrangements were actually made for raising these amounts in the last few weeks before the election. As conditions in the overseas loan markets have not altered to any extent the new Government had undoubtedly received the same advice from the Treasury. While in England last September for the Commonwealth Finance Ministers’ conference, the Secretary to the Treasury (Mr E. L. Greensmith) obtained the consent of the Bank of England and the British Treasury to extend permission granted earlier for a sterling loan of up to £l5 million. This means the incoming Government has the right to raise £l5 million in London this year if it so desires.

Because of the high lending rate in England the Labour Government proposed to uplift only £lO million of this sum and obtain £5 million on the lowerpriced New York market. Preliminary arrangements for the raising of the £lO million in London and £5 million in New York were made by Mr Greensmith.

According to leading financial sources all the new Government needs to do to secure this money

is to make the decision to borrow

it. The Government may delay raising the London loan as long as possible inside the current financial year. The recent cut in the British bank rate could be expected to have some depressing effect on lending rates and the Government will be anxious to take advantage of any easement. If the Government does not. borrow £25 million from normal loan sources internally and overseas it will have to draw to that extent on’the Reserve Bank with a consequent inflationary effect. It could not hope to raise the whole amount locally.