Borrowing Policy "Justified”

Press, Volume CVI, Issue 31187, 11 October 1966, Page 3

Borrowing Policy "Justified”

CV.Z. Press Association) WELLINGTON. October 10. The Minister of Finance (Mr Lake) tonight challenged the Leader of the Opposition (Mr Kirk) to clarify his party's policy in relation to the £l2 million loan at present being raised in London.

The Minister was replying to Mr Kirk's talk in Timaru on Saturday on the Government’s “reckless fiscal policy.” “Mr Kirk’s charge that the Government’s management of finances is ‘reckless and incompetent’ is not justified by the results of my six succes-

isive budgets,” said Mr Lake. “Mr Kirk concentrates on the current cost of raising capital in the international market, but ignores completely the benefits to the economy which stem from the judicious use of such capital.” Mr Lake said the Government’s financial policies were ■’more than adequately justified” by the facts that in the term of office of the present Government, annual gross national production rose by over 43 per cent, and that for the financial year ended last March, the rate of capital formation was the highest recorded in New Zealand—both in monetary terms and as a proportion of gross national production. Annual export receipts had risen by more than £lOO million.

“These spectacular gains i would not have been possible ’ unless the Government had 1 attracted overseas capital in- - to New Zealand,” said Mr / Lake. “While the current rate > of interest on new borrowings is undoubtedly high, such borrowing is fully justified ’ provided the return from the ' investment in works of national importance exceeds the rate of interest payable. “It must be borne in mind • also that at the end of Sep- > tember, Treasury investments t overseas exceeded £3O million ■ and that the yield on these ■ overseas investments benefits i from the same upward interi national trend in interest i rates which affects new borrowings. I “Mr Kirk has referred also ■ in the context of management of finance to the balance of

payments deficit announced by the Government Statistician. “He does not appear to understand that the statistical deficit referred to represents the outcome of economic transactions and does not represent the financial results of New Zealand’s external accounts. “The difference between the statistical analysis of economic transactions and the financial results for the year are of such magnitude that in the March year, 1963, there was an over-all surplus of £29.2 million in the balance of New Zealand overseas exchange transactions when the balance of payments statistics recorded a current account deficit of £23.2 million,” said Mr Lake. “I challenge Mr Kirk to clarify his party’s policy in relation to the £l2 million loan which is at present being raised in London. “When the Leader of the Opposition charges the Government with recklessness and incompetence in the management of the country’s finances, the public is entitled to a clear statement of what alternative course of action he would follow. “He has to choose between cutting back economic growth and employment, and maintaining an adequate capital inflow to the country. “If he is not prepared to cut back growth and employment within New Zealand and wishes to maintain an adequate inflow of capital, he would have no option but to pay the ruling international rate of interest,” Mr Lake said.