The Dominion MONDAY, NOVEMBER 18, 1929. LOANS AN ARTIFICIAL STIMULANT

Dominion, Volume 23, Issue 46, 18 November 1929, Page 10

The Dominion MONDAY, NOVEMBER 18, 1929. LOANS AN ARTIFICIAL STIMULANT

Speaking in the House on the Railway Authorisation Bill at the end of the session, the Hon. W. Downie Stewart, Minister of Finance in the late Reform Administration, tittered a grave and serious warning against the consequences of the inflated and accelerated borrowing programme which the Government seems obstinately bent on carrying into operation. Public borrowing is increasing at an alarming rate, and is likely for this year to constitute an unenviable Tecord in the history of the Dominion. The annual interest burden, moreover,,is increasing even taster than the capital of the debt, owing to the higher interest rates payable on conversion of loans. This is a disappointing reversal of the policy of tapering off loans and working to a closer approximation to national self-sufficiency, which the Reform Party, under Mr. Stewart s guidance, was resolutely putting into operation during the last tew years of its term of office. It is obvious that the present borrowing policy cannot go on for ever, or endure at its existing pace for much longer. While it lasts however, it is popular with powerful interests in. the community. Borrowing abroad adds to available spending power, circulates money, and gives a stimulus to business. It makes jobs for thousands of men, whose spending power, derived from loans, is welcome to the trading classes. It swells imports and keeps up Customs revenue. When it has to stop, as it inevitably must, the process will work in the reverse direction, and the effects will be less pleasing to the beneficiaries. • , . . ~ , , .. Borrowing thus develops a powerful sentiment which makes it difficult to tread again the paths of sounder finance. It is an artificial stimulant, and, like all stimulants, increases the craving it feeds. For this reason a Government, endeavouring to restrict the process within moderate bounds is liable to become unpopular, and even, as was the case last December, to be ousted from office in favoui of an alternative party with an expansive and expensive programme. Whether we like it or not, signs are not wanting that our present headlong rate of adding to the public debt cannot endure mucj longer. We shall be forced into economy by the sheer difficulty of obtaining larger loans, and the increasing interest cost of those, we do raise? The rising interest rate will force us to a more self-reliant-policy, and to restrict our present grossly extravagant public works programme within the bounds of real necessity and utility. A steady but not too sudden recession from, the present programme is the policy most in accord with the national interest. On the completion of partially-constructed works no more should■be entered upon without exhaustive. preliminary survey of their economic possibilities. We should think first and spend afterwards. Unpayable railways should not be .laid down, and the army of public works employees must be gradually reduced and absorbed into private industry. The attempt to maintain the public works system as. an unemployment relief agency is uneconomic in character and impossible to maintain in practice. ' - Future works should not be undertaken unless it is reasonably certain that they will pay on the basis of a business balance-sheet, and a wider sphere should be conceded to private enterprise, w.orking in cordial understanding with the State, for such work of a develop- • mental character as remains to be done. There is little of a developmental nature in the Dominion that cannot now be obtained by private enterprise. After all, New Zealand is no longer a pioneer country. Its arterial development is so nearly complete that most of the remaining tasks can safely be left to private agencies without •further burden upon an already over-strained national exchequer.