CONVERSION

Evening Post, Volume CXVI, Issue 33, 8 August 1933, Page 10

CONVERSION

AUSTRALIA'S SUCCESS

FURTHER PLANS

(From "The Post's" Representative.) SYDNEY, August 3. . In view of the success of the recent £17,221,000 conversion loan in London it is expected that the Government will take early steps—probably this month—to convert the remaining £15,000,000 of 6 per cent, stocks. These are Commonwealth optional securities, and this' will. be the first operation directly on behalf of the Commonwealth. To date all the conversions have been oh behalf of the States, and the finances of the State Governments "have benefited accordingly. The total annual saving on conversion of Australian issues during 1932-33 has been as follows:— •" Interest ......... 853,524 Exchange 213,384 -Great credit is given to Mr. S. M. Bruce, Resident Minister in London, for the success which has attended the conversion operations. It is not expected that there will be any difficulty witli the Commonwealth issue, for the financial reputation of the Federal Government is higher than that of the States, and Mr. Bruoe himself is held in very high esteem in London. Since he took up residence in London great success has attended the financial operal tions of the Commonwealth, and events have shown the wisdom of the policy under which all loan transactions are left in the hands of the Loan Council, in, the deliberations of which the Commonwealth Government is all-powerful. The co-or-dination of finances has had nothing but beneficial results. It has prevented competition among the States, and has taught each Government to have due regard for the other. The old haphazard system has gone for ever, and- also, let us hope, the old days of extravagance. When the Federal Government converts its 6 per cent, bonds the way will be clear to deal with optional loans bearing a rate of interest about 4 per cent. There are several loans bearing interest at more than '5 per cent., and it is hoped that all these will be converted before the end of the year. The same optimism cannot be displayed in regard to Commonwealth loans domiciled in New York, for only one is an optional security. It is for £ 10,000,000 and carries the comparatively lo\y rate of 4% per cent. The other Australian loans raised in America carry interest rates from 5 per cent, to 7 per cent. The 0 and 7 per cent, stock are Queensland loans —a legacy left by Mr. Theodore—Australia owes a total of £47,079,677 in New York with an interest bill of £2,400,000, esclu" sive of exchange. It is of importance to note that Australian stocks are at a heavy discount in New York. For instance, 5 per cent, stock is quoted at about £70, and this means an interest yield of more than G per cent. That would be .another serious obstacle to conversion.. -i