Financial Crisis in N.Z.

Clutha Leader, Volume II, Issue 83, 10 February 1876, Page 3

Financial Crisis in N.Z.

'**! — ~ — ! —^ ; — T~A letter nas appeared in the i Sydney Herald,' pointing out that a financial crisis was imminent in New. .Zealand. The letter created quite a sensation throughout -New South Wales and the neighboring colonies, and. is now being eagerly criticised throughout New; Zealand. The letter is written by Mr W. H. L. Rankeri, and is dated from Wellington, December 18, 1875. We give the following extracts :~ "•'

• The writer asks,:-H"i What is'Vthe true position of, New Zealand? Has that Colony actually been paying interest out of loans? Has she spent millions in public works which promise to be quite unprofitable; in importing labor from other colonies ; in maintaining a .gathering and a threatening army of labour, and a staff of officials, useful to the Government but cumbrous to the country — all by this policy ? Has she, in shorty made a bad speculation ? Is a crisis imminent!- -aa |

After comparing the returns from Victorian,- New South Wales, and Newf Zealand railways, the writer goes on to say that : — !* The Government outlay, and the debt of the Colony, are not of such a pressing,, nor of so important a nature, as the trade of the country. A commercial crisis only can create [ a political failure in such schemes. A fall in wool will turn out a Ministry quicker than a bad bill In Australia or New Zealand. And the community will suffer more by that fall than by any Government, it is this possibility that hangs over New Zealand-^a .possibility that before production is materially increased by all this outlay in labour and works, the price of. produce may fall, thus checking production, and leaving a large balance against the • couatry by her overtrading. That this is excessive overtrading this paper will show, how it has been sustained will be shown, arid how -production has not yet been increased by immigration ; and that so far has this over-trading gone that a continuance of it will alone, without any fall in the price of staples, bring commercial and then political disaster to New Zealand.

" Production has not increased yet by the immigration; indeed, it does not increase so fast as in other colonies, and in no proportion to- the population . In \ New Zealand the exports

have only increased 14 per. cent., while the population has increased 60 per cent., and their ordinary increase alone would be considerably more than 14 per cent. During the four years ending with 1874, the population of New Zealand increased about 30 per cent.* and the exports nil. You heve probably read statements of exports per head,, of the population very satisfactory to any community, and flattering to New Zealand. It is surprising how many intelligent statesmen and papers make use of such foolish figures. . Let us look at her accummulations. The principal export being wool, nearly 54 per cent of all, we can count her flocks, the principal capital, and compare their increase with .that of other colonies. Here is her principal accummulation. Since 1867 the sheep here have increased 39 per cent, which is not much; yours being 44 per cent, during the same period. Cattle, are not so productive ; but in this case, again, New Zealand is behind you, the figures being 58 and 60 per cent. The next principal export is gold, the yield of which is falling off, without new mines being j found or new fields remaining to explore. But there is one great fund of future production, which does not' so much directly as indirectly increase the exports, but it is of the utmost consequence commercially, and the greatest value socially, to a colony, and in this New Zealand compares very favorably. This form of accummulation is the arable land, or the area under crops. While your colony seems to have been neglecting agriculture for mining, and Victoria increasing her area of tillage only 62 per cent, in the six years ending 1873, New Zealand has increased hers 128 per cent -■ This is the only satisfactory comparison she can make. On the whole, wealth does riot appear to be accumulating so fast in New ZeaI land as in Australia. But she has, ! perhaps, better prospects from the. great ! increase of agriculture, for that increase is a sure proof that it is profitable ; and if profitable when wool: growing, mining, and so many industries are ex-tremely-flourishing, it is the best of stand-oyea for bad times. It shows that food can be raised cheaply, to allow the large profits; current in ..all industries ;, and cheap food means abundance of labor; the strength of a country in such animate.,- .

" Thus we find the exports are not i increasing ns they should, theaccumu-' ilations are not so great as might.be ex.-. ipectedj there is nothing to show yet ifor the iriimigrants> arid > no proof that ithe people of New Zealand have done, !as much as their 'neighbors during the' lastfew yeara.A There.js a; rate of jproIgress attained, however, that must j satisfy any economist, and a form of 'production- proved . profitableTrthat.pf iagriculture— that iriust please' ariy tstatesEaanifh;Bu.t ithe .trouble is npt*that •her progress in production has not been :quite satisfactory jitisj that whilbproiductioniSrriQtiricreasing her, .trade is. •It is riot that thereis any .sign of her loans and scnemes being unprofitable ,

they ca^h<^ returns y etr^ ananas "far fxa"mfiffi[e~c&n calculate they ; ° -remarkably well. But, in view of such returns possibly, or in confidence of the pricje of her principal produce still keeping ; high possibly, or-iri trust to- good ' foi* tune possibly, New Zealand is getting under heavy liabiKtie&'in- Commerce a;s . well as in her government. This is" shown by her imports. * ~ Imports and exports pay for each other; the difference goes to the carriers, and i; an^ "disparity in . their, valuations - arises froiii people valuing what they receive more than what they gave. . Since ad .valorem [ duties were introduced this, disparity lias been small, resulting' in tlie three years' imports -ending 1873 bf ; Victoria exceeding exports - by only ; £600,000, or about 2 per cent. In New South Wales the disparity is greater, the exports falling short by^ £1,250,000, or about six per cent, a -But in New Zear land-^-here are the, figures for? the : lasjt two :• years, and -the: portion oi* 187$ ending 30th,. September ;.r— ,a 1 Imports ... £6,464.687 Exports .. £5,616,371 8,121,612 8, : 252,26^ 6,273,906 4,148,555 £30,a60,4/)5. „,.... .. £15,011,19$ Showing a balance against New Zealand of £5,851,210.: -There is no reason to believe, the valuations of either are much different from those ot the other colonies. It might be that a difference represented a profit, bubit cannot beso in this case. The- -exports are nearly altogether of leading staples, and; the valuation of imports is checked by the ad valorem duty.; -.:. \ : ■ ' .■;■•:■>'■■ , . '.*■ Now there is a great disparity here, something very Unusual in any* trade, out of all ordinary rule, and beyond ordinary caused. It. is impossible the Colony has made- a profit . of -five aiid three quarter millions on her trade in three years ; it is not likely; she has made greater profits than Australia. But instead ' of this' difference being 2 per cent; as in Victoria, or 6 per 'cent, as in New. South ' Wales 5 ,; it is 1 about 38 per cent, in New Zealand by. the, latest statistics. She has not paid Tor goods •received to the,; value of £5,851,210 which is more than any one year's total, exports have ever amounted to; It has been ' stated that these imports have been very much increased by the rail-i ways and as that material is paid for out of loans raised at Home, only a ! small balance of this L 5,951,210. has to be liquidated by the trade of the Colony., But as only some 300 miles of railway are open, and as all the lines are cheap narrow gauge roads, 401 b. rails generally it is impossible they oan take more than a small portion of these enormous imports. . • ■.:..-. .-. "The first question: that: suggests itself when the fact of this debt is realised, is how did it arise ? How could people trust New Zealand so far I The answer is that the bank returns show some of it, and the people at. home who are in the colonial trade, probably tak-" ing the lead of the banks, have given the remainder. Confidence - gives con J fidence j a good wool market-, a rapid increase of population, a J development; of the country, and . other corollaries* have finally brought about this state of things." . . .- -.- - r - The gazetted " returns of the banks trading in New Zealand are thus given by. :Mr JRanken fori the periods Aending every six months^ y beginning 31st December, 1872. He quotes the latest returns, on the 30 th September, 18^5 thuc : — Deposits- and -notes out ; discounts' arid- -loans, 1 L 9,109,959 ; , coin and . bullion,; L 1,624,5.00. The paid-up capital of these banks is he says L 4,644,054. After stating that there is' great inflation of trade here, he observes i—^ " These figures show the : Colony: is overtrading, which is proved again by the excessive imports, -and which show a pace that will not stand a check now. The only chance is to keep going, trusting nothing will give away until the pace is gradually but steadily reduced. A fall, of 2d in wool would upset everything with a .tremendous, smash. . '• So that there, is good reason to say New -;Zealand is . in a ! critical-positions It is not j however,; a political, but ! a commercial crisis, pure arid simple, that is to be dreaded. Immigration .and public works scheiries promise well, the Colony is doingfairly* the land is getting^more thoroughly settled than in any? ! neighboring. Colony, but people seem to be too sanguine. The value of land is | not according to its -yield, but .according to what " itwill be' worth"" iri a few I years. So with all -property and trade. In anticipation of future rises in vatee, r ithe farmer becomes indebted to the[ i storekeeper, the storekeeper crams . his . ! sheds full and gives the merchant a bill, ithe merchant takes his bilPto the bank land. that: matter Ab-. ended. ! So the; I merchant doubles his orders home, .the. shippers, seeing an- increasing trade 'double their consignments, the Colony? : obtains credit . at , home, and thus , a ibill of nearly six -millions has been irun up. If any check 'occurs - ; in the a market ofy ; any( -staple, aAsettlement will be. precipitated,; ;i bui, if ;prices keep up, by steady and continued iwithdrawl of credit ..the trade of New,, Zealand may be brought into the nor-" imal channel; ; At present ii is' critical;' jit-has exceeded all f oririer' Kmitsj over-' flowed and swamped production f6r : w year hence iafrleast/- M& .fe^veky little •riiore-witt-;nwke:it break all bonds, flood and devastate the Colony," (a y h *yj

". ft W. H. L. RAjfiiEN.'!