A FINANCIAL FORECAST.

Evening Star, Issue 9708, 17 May 1895, Page 1

A FINANCIAL FORECAST.

During the debate on the Budget last session the Hon. Mr Larnach expressed opinions relative to the chances of floating a 3 per cent, in London that have been amply verified by recent events. The hou. gentleman said : We are told- by members on the other side that money cannot be borrowed at 3i per cent. I am going to tell my friena the Treasurer that, in my belief, looking at the nature of the security—that it is a mortgage security and guaranteed by the colony, that the security will be improving day by day by the labor of the individuals interested in the borrowing of the money, the settlers—they will be brought face to face with their responsibilities and be encouraged to energy in a manner they have never been before. I say that, under all these circumstances, I am going to tell the Treasurer that, in my opinion, he can borrow this money on better terms than 3i per cent. It is well known, and will be known, perhaps, to some honorable members in this House, if they have had any experience in such matters, that the investors who deal with our loans are not, as a rule, the real and permanent investors in them. The first robbers and I say it respectfully in connection with these great loans arc those who buy them wholesale, and why? For the purpose of retailing them out at a profit. They are the people who take up our loans in the first instance. They take them up in rflobo—wholesale, as it were—and in the course of a day or two, or within a week or two, a syndicate may have parted with a quarter to half a million in sums of from £IOO to £SOO, and up to a few thousands. Well, these primary investors prefer a loan, presuming the security is good, placed on the market at a discount. It will go off their hands better, with more ready profit. They, therefore, would rather apply for a loan at a discount than at par or above par, because, in the market, to put a loan at a discount is a much more favorable proceeding for them than a loan which is already at a premium. And I again maintain that if this loan is put on the market at 3 per cent., with it 3 excellent security it would be negotiable, I think, at the most, at a discount of not more than 6 per cent., but perhaps at less than that. But if it went at G per cent., what would be the result? It would result in this : that, after paying the Bank of England -i per cent, (the usual charge for manipulating our loans), it would leave some £2,500 for miscellaneous expenses, advertising, etc. ; and the whole 6 per cent, discount would not reduce our million and a-half by more than £IOO,OOO. And, if we had £1,400,000 lent to the colony at 3 per cent., we should be this much better off: we should only be paying £3 4s per cent, for our money, not 3.',; and we should also be accumulating during the currency of the loan a large amount of capitalised value in the saving of interest, which in thirty years would amount nearly to £50,000, and in fifty years to nearer £90,000 or £IOO,OOO. Then, I say that, as this is the initiation of a new and great policy, and a policy that is not. going to be a merely temporary policy, but a policy that is going to extend itself year by year, and not intended only to last a few years, but which will, and must have a long life, I therefore believe the Treasurer would act wisely if he considered, before he placed his first loan on the market, the advisability of placing it at a rate not higher than 3 per cent. ; because I again maintain that, if he does so, and will communicate with the Agent-General, I believe he will find that he will very likely get all the money he wants, not at 33. per cent., but at a cost of only £3 4s per cent. By placing the loan at a discount he will get the money at certainly far below 3A per cent.