DOMINION’S FINANCIAL POSITION

Dominion, Volume 22, Issue 73, 19 December 1928, Page 12

DOMINION’S FINANCIAL POSITION

REVIEW BY STOCK EXCHANGE CHAIRMAN STATE’S LENDING OPERATIONS Dominion Special Service. Dunedin, December 18. Dealing witli the financial position of the Dominion in the course of his address at the annual meeting of the Dunedin Stock Exchange to-day, the chairman, Mr. Harman Reeves, said that money’ was more plentiful to-day in the Dominion than it had been for many years past, and the trend of interest rates was downwards. A big factor in creating this surplus of money, besides the inflow of money from the sale of our products, was the fact that the State had become a large lender of money. Where years ago all the financing of farmers and others was done through the banks, loan companies. trustees, and others, to-day the great bulk of these advances were being made by the State. The trend of the State becoming the only lender might become dangerous to the wellbeing of the community, as some day the borrowers from the Government might become so numerous that they might get a strangle hold on the Government of the country. In the last four years no less than £24,000,000 had been lent by the Advances to Settlers Department alone; less than two years ago large sums of Australian money were invested in New Zealand public bodies’ debentures, but during the last twelve months very little had come to this country for that purpose. It had been stated that too much New Zealand money was being sent to Australia for investment. He was sure nobody regretted more than the stockbrokers the necessity for this, but their great difficulty was to find sound New Zealand Investments for their clients. In their absence it was necessary to look further afield, and naturally turn to Australia, their nearest neighbour, for their requirements, although a large amount also went to London. He did not think it was too much to say that at least anything from £2,000,000 to £3,000,000 of money had been going annually from this Dominion for the purchase of shares in Australian banks and for various Australian and English investments. Proceeding, Mr. Reeves said he thought it had been suggested somewhere that the payment for the completion of the railways—a doubtful proposition in view of the success of motor traffic —could be defrayed by the issue of New Zealand Government debentures to the contractors. The Stock Exchange should, in his opinion, strongly protest against the adoption of such a course of payment. The completion of the railways or any other Government works should be paid for in cash only. It would be a blow at the very foundation of the finances of the Dominion, and more particularly on the London market, if a form of “greenbacks” got into circulation in the shape of payment by debentures. Contractors when they received their debentures would naturally require to turn them into cash by selling them, and if they happened to strike a weak market they ■would be forced to accept a considerab discount, with the result that all Government issues would immediately be correspondingly affected. Besides this, to issue such debentures would shatter their financial standing and good name on the London market. The loans already issued in the Dominion amounted to over £107,000,000, and in justice and fairness to the lenders of these issues it was not advisable to have further issues other than for cash. In conclusion, Mr. Reeves stated that the general outlook was never better and that every branch of business and trade could look forward in the coming years to prosperous times and increased business.