NEW ZEALAND LOANS

Evening Post, Volume CXXII, Issue 32, 6 August 1936, Page 12

NEW ZEALAND LOANS

MISGIVING ALLAYED

"A WELCOME ASSURANCE"

From "THe Post's" Representative.) LONDON, July 11.

■ A statement that has been hailed as "a welcome assurance «that the New Zealand Government does not intend in any way to disturb the existing contractual terms that attach to loans domiciled in this country," was made by Sir Austin Harris, chairman of the National Bank of New Zealand at the annual meeting on July 8. •

"It would not be unnatural, nor in my opinion could anyone take exception," Sir Austin told the shareholders, "if Mr. Nash, on his forthcoming visit should a^ail himself of the opportunity of discussing with his financial friends the future conversion of loans bearing high rates of interest with a view to some possible readjustment on terms which would be fair and acceptable to all parties.concerned, especially in the^ direction of earlier dates of conversion. For my own part, I think it is only to be expected that this subject is one which naturally would be raised by Mr. Nash while over here, in view of the efforts on the part of the New Zealand Government to seek any possible, economies, and in the hope that some acceptable proposal might evolve from his discussions; but I am in a position today, on the direct authority of the New Zealand Government, to reaffirm quite definitely that there is not, and never lias been, any intention on their part to interfere in any way with the service and terms of the loans domiciled in England. This is in complete accordance with the high traditions of the Dominion. I hope that this statement- will allay any remaining fears that anything in the nature of a forced conversion was'ever contemplated'by the responsible Ministers." ' '

Commenting; on this statement, "The Times" said: "In view of the prominence naturally given to the .original statement of Mr. Savage, it is very desirable that the -widest ' publicity should; be accorded '.o this welcome assurance that the New Zealand Government does not intend in any way to disturb the existing' contrattual terms that attach to loans domiciled in this country. While from the first it was felt that the earlier remarks of Mr. Savage were not meant to convey any serious intention of departing from the Government's strict regard for its obligations, there is' no doubt that they did give rise to a certain amount of misgiving in the minds'of British investors. If it be thought that they showed exaggerated nervousness, allowance must be made for the cumulative effect of the shocks which invested capital has received in recent years over oversea investments, not all of them of foreign domicile. It is the earnest wish of all friends of the Dominions that they should continue to receive the most favourable consideration that dan be accorded to trustee borrowers, but if this condition is to obtain it will be necessary not only that contracts, shall be maintained in the letter and spirit, but thai investors shall also feel the utmost confidence concerning " their maintenance." ' - . •-■ : ■■;-.■'

The view taken by the "Financial Times" was: "Investors will be encouraged by the fact' that Sir Austin was abje to interpret the New Zealand Primei Minister's speech relative to the cost of the overseas debt in an entirely reassuring light. The alarm caused by Mr. Savage in the minds of investors in New Zealand securities has been diminished by subsequent explanations. Now it should be cleared away by the declaration by the chairman of the National Bank of New Zealand."

Commenting upon otner sections of the chairman's address, the.same paper said: "The great success of the Labour Party at the November elections and the legislation which has followed seem to be regarded as reasons more for caution than anxiety. The new Reserve Bank statues confer wide powers, and, in operation; may seriously affect the National Bank's activities in the exchange market, in common with those. of other trading banks. There should be no delay in agreeing upon the rate at which they will be able to buy sterling from-the Reserve Bank. Another point.is the power of the Reserve BanI*, with the authority of the Minister of Finance, to call upon the trading banks to increase to any extent, from the existing 7 per cent.7 of demand and 3 per cent, of. fixed liabilities, their balances with, the Reserve Bank. Large deposit balances would mean considerable control of credit, and this the Government feels should reside in its hands. Sir Austin Harris does not think the Government would exercise the power except in emergency. The view is reassuring." v