LAND FINANCE

Evening Post, Volume CXI, Issue 93, 21 April 1931, Page 14

LAND FINANCE

TO PROMOTE SETTLEMENT

(To the Editor.) Sir,—The Leader of the Opposition (the Right Hon. J. G. Coates) placed his finger on the crux of the present economic dilemma when he recently stated that the basic'cure was contained. in the- formula "more export production." All:other phases o£ endeavour in the community must be subordinated to this issue. "While every effort must at " "the same time be directed to reduce national overhead and all factors making for high primary production costs, it must bo fully grasped that these efforts are essentially of a negative character, and that a permanent solution to out" economic problems is .assuredly bound, up entirely in the direction indicated by Mr. Coates. , In approaching a practical solution, it is:as;well to analysq the existing conditions which require to be co-ordinated before national action on anything like the scale required can bo organised. I take it that "the main factors can be tersely ennumerated as follows: — 1.- (a). There are available a large number of trained or partly-trained experienced and practical farmers and farm labourers and young men who are both landless, aucl with' little or no capital, and many of these ai'e by force of circumstances either in urban occupations or doing, non-produc-tive -work under emergency legislation. (b) A number of unemployed and city workers without farming . experience but who would be willing to go on the land were .the opportunity for gaining the requisite .experience available. "J. A very largo number of farms and holdings-which are only partially developed arid which if subdivided into smaller units;: could bo made to very largely increase productive capacity. 3. That' from a national viewpoint it is a more ■ efficient policy and resulting1 in less overhead expenditure in the upkeep of social services and communications if closer settlement schemes are substituted lor. that' of. opening up virgin country, oi- new and. raw areas. 4i That,the state'of the money market makcs';lpari capital for, most purposes either .Unprocurable or too dear. ForVthe- consideration of those on whose shoulders, rests the responsibility of givr ing- effect to measures which will restore prosperity io our country, I would commend .'the following proposals: The creation of a new form of financial instrument, to: wit, Government of New Zealand and Land Bonds to bearer in denominations.of ''£50, £100, £200, £500, £1000, and £5000.. 7 Bonds to be free of stamp duty.■ Bonds !to be issued onthe currency of, say, the. amortisation duration of a 2 per;'cent.-, sinking fund. Interest at tho rate of, say, 4 per cent., to be paid lialf-yearJjv A study of the London money i'ates::.ahd the gold production curve over a very!.: long period suggests that & per cent: is a fair rate, and one at whicli. money in the near future will.be available, for. gilt-edged securities. Payment of principal and '■ interest, to be guaranteed by. the Government of New Zealand from a central fund which in turn will, in addition' to the safeguard of recourse to' taxation; be secured against broad acre and'-.nidHgage : collateral. The practical functioning','ofI;.this, instrument, may I suggest,!would be more or less on the following general lines: In the first ease we have .'the principle and operations of the' Local Rural Credit Boards.- These or the principle, could be multiplied, extended or- elaborated as circumstances dictate. -Applicants for land would approach these boards, satisfy them as to their ability to farm and capital available, and indicate'to them either some specific portion of land -which appealed to them and which came within the purposes of the board's powers, or' request the' board to nominate property for inspection and purchase subject" to~"apceptance. " I take it that in order to avoid the incidence, of purchase fat fictitious or non-economic values, very stringent regulations governjng purchase would require to be enacted —possibly limiting purchase price to land' las valuation "subject perhaps'to a--set scale of modifications./. Also within strict-, ly prescribed limits the boards would be entrusted with powersvof!compulsory acquisition subject 'to an'appeal to a-final authority. I; appreciate; that' in suggest-, ing the application, of compulsion one is on delicate ground, but the needs of the State ;must. be, paramount, and if. price is alone the deciding factor I presume that future. taxation incidence would be-filed on the higher valuation to. accord with the: price demanded. -~■■ .-;■-,-'• ... ,' # '•., ■■ ■ I take it that the owners and interests to a parcel of land -would have every reason to be,.satisfied:'with the;; Government scrip :they> would Te.ceiv.eiu; exchange for their property. -The scrip would; naturally be negotiable, and '• presumably ' immediately available, for quotation for sale j on the Stock Exchange, or otherwise, and us collateral security. As,- subject.to the conditions of.sale .by Government, of the., properties purchased fay 'tlie"-'lnstrument,' | generally speaking the repayment-- of interest and sinking; fund.to, the Govern-] ment would follow automatically'and. im-! mediately, no undue inflation would therefore occur, and no undesirable reactions on domestic trade and finance would happen. On the contrary, the functioning of the suggested instrument ; would have the effect, of releasing frozen assets, and balances, and would convert these into liquid credit for the production of wealth and the means of employment. .Naturally, there are a number, of loose ends to be tied up .and practical routine to be hammered out, but I firmly believe that the application of the general principle enunciated will lead to a big, forward move in land development. Of course, the questions of where necessary the further financing of the would-be farmer for stock, fencing, clearing, housing, fertilisers, and access have all to be studied in conjunction with the general idea. In these respects, however, the ■machinery and means for dealing with these aspects are already in existence. 'In certain cases there might be a period of short' duration when the whole or portion of the interest charges would have to be carried by the State. I take it that the principles of sound finance would dictate, that an interest fraction would be, spread "over and levied on all purchases under this scheme to provide for this contingency. Thus the rate payable by the purchaser might be made up by interest Vper.cent., amortisation 2 per cent., administration % per cent., guarantee fund l& per cent, total 7 percent.;- The large Kinking fund proportion would beneficially serve . the' purchaser, the State, and the nolder of the scrip by progressively improving the value of the ultimate security, viz., the actual broad acres, by reducing the liability within Such a reasonable period ,as has been: publicly advocated by such a well-known financial'authority■ as Mr. A. C; Davidson, the' General Man-, ager of the Bank of New South Wales. I trust that this contribution to your i valued publication'niay at least serve the purpose of crystallising attention to this matter of supreme import to the Dominion.—l am, etjcr, ; CONRAD B. LOCHNER. Auckland, §otli April.