“South finances the north”

Press, Volume CXI, Issue 32543, 1 March 1971, Page 12

“South finances the north”

The “ cliche that the South Island finances the North “ Island ” was mentioned by a North Island financier, Mr G. Patrick, last week, when reporting a *• remarkable . response ” in the South Island to a North Island debenture issue. The “ cliche ” is of long standing. Another version has it that “ Dunedin “ money built Auckland and someone once said, “ Aucklanders live on next year’s income, “ Christchurch people on this year’s income, and “ Dunedin people on last year’s income ”. Like most generalisations, these need to be heavily qualified; but there is more than a germ of truth in them. The mistake most commonly made by visiting businessmen in their first dealings in this country is to assume that its inhabitants are homogeneous. Certainly the wide regional variations in living styles and spending habits which characterise older societies are not to be found here. The typical Invercargill family lives and spends much as the typical Auckland family does; this could scarcely be said of typical families in London and Liverpool, or in Naples and Milan. But the differences in the New Zealand population can still be significant for businessmen in certain fields, particularly finance.

To the extent that “Auckland was built on “Dunedin’s money” is true, it is also true that Dunedin’s money was well spent. The vigour and enterprise which has characterised Auckland businessmen from early days has justified the extra risks they have taken. This is especially true in times, such as the present, of marked inflation. Dunedin money invested today in Auckland buildings, in equipping a factory, or even in merchandise, is likely to be worth more next year or whenever the loan falls due. The canny lender’s 8| per cent debenture will be repaid, with interest; but the entrepreneurial borrower will probably make a bigger profit. The catch is that the borrower’s business, particularly if it is financed on too much borrowed capital and insufficient share capital, might not survive a recession or even a prolonged credit squeeze. The over-ambitious entrepreneur then loses all his investment. After the creditors, including the holder of secured debentures, have been paid out there is nothing left for the owner. And perhaps that is why there is still debenture money available in Dunedin to back worth-while ventures in Auckland.