THE LOAN.

Evening Star, Issue 19550, 7 May 1927, Page 6

THE LOAN.

The response of the London investor to New Zealand’s latest application for fresh loan money shows a degree of confidence in the financial administration and future prospects of this dominion which should be gratifying to its citizens and rulers. It is not too much to say that those who have command of funds for investment consider that of all the outlying parts of the Empire New Zealand offers the best security for loans. Our present requirements of six millions sterling were over-subscribed in very rapid time, and from the dealings which immediately began in the scrip it seems as though the financial advisers of our Government would have been justified in fixing the issue at par instead of at a discount of i per cent., for the difference largely goes into the pockets of the “stags” instead of an extra £30,000 as the proceeds of the loan going to the Government. When it is remembered that last year lenders would only advance New Zealand £9B 10s for every £IOO ultimately .to be repaid, "and that the Australian ComluoiuVeaifch on the last occasion had to

be content with £9B (these loans being, like the present one, interest-bearing at 5 per cent.), the opinion of investors becomes apparent. It has been stated that financial circles in London compare the amount of information conveyed in New Zealand loan prospectuses rather favorably with the reticence maintained in those of other States. Furthermore, the very brief statement recently made by our Minister of Finance of a small surplus (over half a million) of revenue over expenditure for the year ended on March 31 last may have opportunely enhanced the reception of the loan. The year’s final accounts presented an aspect better than might I have been expected from some of the interim figures. The revenue proved unexpectedly buoyant, being somewhere near a quarto* of a million greater than that of the preceding year, whereas the Minister had estimated that it would show a decrease of nearly half a million. But the expenditure increased by double the amount of the ■ £400,000 increase the Minister had calculated on. This new loan will ultimately increase by £300,000 a year that considerable part of the expenditure which the Consolidated Fund has to find for interest payments. A year ago this inevitable annual outgo stood at over eight millions, or £5 16s lOd per head of our population. When one thinks of it in terms of the average amount each inhabitant has to pay yearly in interest on borrowed money, one side—the less pleasant one—of the borrowing policy stands out in bold ®ief. Presently that amount is likely to increase even without further additions to the National Debt. In the next five years about ninety millions of existing debt falls due for repayment, and it is unlikely that renewals can be made at'as low a rate of interest as these loans were originally raised at. One-half of the present loan is for the reconditioning of our railway system and the completion of certain lines. Whether this money will be fully reproductive depends on whether the hoped-for economies of railway operatic will materialise sufficiently to enable our railways to regain the traffic they have lost to road competitors. It is evident that Government expenditure of loan money on what are known as non-reproductive works will be kept as low as possible, and it is imperative that full value must bo obtained for every penny of expenditure of this latest six millions.