Evening Post. WEDNESDAY, JULY 3, 1940. OVERSEAS SECURITIES

Evening Post, Volume CXXX, Issue 3, 3 July 1940, Page 6

Evening Post. WEDNESDAY, JULY 3, 1940. OVERSEAS SECURITIES

Under the Finance Emergency Regulations the Government has taken power to take over from private owners who are New Zealand residents any currency and securities held overseas. It is not stated that the Government will at once take over securities. The Minister's phrase in explanation of the provision wast "If it is considered to be necessary, in order to strengthen the financial position of New Zealand'"; but holders are required to make returns forthwith and offer their currency and securities to the Reserve Bank. Many of these holders, as they perceive what this may imply, are becoming anxious lest they should be subjected to a discriminating measure for which there is not at present a real war reason, or indeed, as regards the discrimination between external and internal investments, any reason at all. Admittedly the war has made New Zealand's sterling position more acnte in one way, as our overseas commitments include defence equipment (partly provided for by the special British credits granted in 1939) and maintenance of the Expeditionary Force (covered by a British Government loan). Against these must be [set the improved return for produce through British Government purchases. But the difficulty had its genesis in the pre-war prodigality of the Labour Government, which dissipated the ample sterling reserves ; formerly held by the Dominion. Had reasonable foresight and prudence been shown in the pre-war years the war necessity could have been met and we could have helped Britain without resorting to the extraordinary measures now contemplated.

The powers now taken aTe said to have a precedent in Britain and Australia. But we are doubtful whether, even if this precedent is to be found in powers taken, it exists in practice. Britain certainly controls all dollar funds and securities held by British; nationals. There was similar control and use in the Great War. But we have no knowledge of British action, or Australian action either, affecting funds held in New Zealand. And this must not be forgotten: if New Zealand interferes with New Zealand investments in the United Kingdom and the Commonwealth, it may invite retaliatory action by Britain and Australia. Britain; certainly, and Australia probably, are in a stronger position to take such action to our national disadvantage. To mention only one item: Britain has £157,000,000 invested in Dominion loans. Of course repayment of the sum is spread over twenty years, but if repatriation of even the maturing part of the funds were required (say, in payment for produce purchased) the Dominion would be most embarrassed. Possibly the Government considered this aspect of the matter when, early in the war, the late Prime Minister said, in reply to a Parliamentary question, that action regarding New Zealand-held overseas securities was considered inadvisable. There is a further national consideration—admitted by the Minister of Finance—that, as New Zealand overseas assets are repatriated, the Dominion diminishes its sterling resources for future use. At present we have a small but useful sterling and overseas income from interest and dividends. That will cease if the capital is sold.

The terms of transfer, if Government acquisition is decided on, raise a question of personal fairness. The Minister of Finance has said that payment will be in cash or New Zealand Government Stock "at a price not less than the market value of the securities at the time of the transfers." This may sound equitable, but it is not really so. Many of these overseas securities are quoted now at a lower price than the holders paid, because the earning and dividend-paying capacity of the concerns is reduced by war. For a while shareholders will receive less, but when the war ends they may expect a recovery. If they are paid on the present depressed basis and in Stock at fixed interest they will not share in the recovery that they are entitled to expect. Their position will be unfair in relation to the position of shareholders in New Zealand concerns that are similarly affected and whose investments will not be disturbed. Further, any considerable selling of holdings in overseas companies would pull the price down still more. The Government, if it decides to take over any of these securities, cannot justly disregard these facts. War calls for sacrifices, and pre-war imprudence has made greater sacrifices unavoidable now, but the measure of sacrifice should be equal between various classes. One class should not be specially penalised because it happens to hold overseas assets.