The Evening Star THURSDAY, JANUARY 7, 1932. AN INTERNAL LOAN.

Evening Star, Issue 20994, 7 January 1932, Page 8

The Evening Star THURSDAY, JANUARY 7, 1932. AN INTERNAL LOAN.

When on tlio cvo of Christmas Mi George Forbes announced his Government’s arrangement with the banks trading in New Zealand to place the money accruing from the sale of our exports in London at the disposal of the Government, we stated at the time that virtually this step appeared to be the equivalent of internal borrowing, negotiated through London. Our Government needs funds in London, the remitting of it there is a costly business because of the adverse rate of exchange, and this appears a sensible and economic method of circumventing the difficulty. But the banks will pay the producers or exporters the returns for their produce in the ordinary way, and necessarily the New Zealand Government must reimburse the banks for the advances made. That reimbursement can best and most economically be made to the banks here in New Zealand. But the Government must first have the funds to do it with. As we pointed out on December 30, the probability of an internal loan flotation must be reckoned with, Mr Forbes now announces this. There is no alternative. The Government is short of funds, and the Loudon money market is closed to us. On the last occasion when New Zealand borrowed in London it was with the utmost difficulty that the accommodation (five millions, if we remember aright) was obtained, and the delay over the matter was understood to bo somewhat disconcerting to the Treasury. As everyone knows, since that time a crisis has occurred on the -jondon money market, and the prospects of our Government raising money there by loan to reimburse the London offices of our trading banks to enable them to pay our exporters were stated by us at the time, and generally recognised, as quite unfavourable. Mr Forbes states that the London money market may remain closed to us for twelve months. We construe him, from his diction, to regard that period as a maximum. Unlike Australia, New Zealand has never regarded New York as an alternative lender if London is chary or adamant; in any case conditions in New York seem at present worse than those in Loudon. So New Zealand must practise self-reliance. There are good grounds for believing that a good deal of money is locked up here awaiting investment. This will be a good opportunity for its possessors to show in a, practical and helpful way their belief in their own country. The only way by which a prospective borrower can obtain anything like reasonable terms from a prospective lender is by showing him that ho has a sound business and manages it sensibly M c all believe in New Zealand. This dominion is sound. Even at present market prices wo could pull through, if “ overheads ” were reasonable. Business firms are gradually falling into lino in the trend of trying to reduce “ overheads.” It is now for the Government to fall into line. There has been retrenchment in the Public Service. There has to bo a great deal more vet. There are people, not in the Government service, who arc in business and not making money in it. There are others who are wageearners, still others who aro only working part time, all on “ the cut ”; and they arc all paying heavier taxation than they did when

they could better afford to. They arc asking why. They know that one reason is that interest has to bo paid on war loans and on loans for New Zealand’s development. They also know that they have to pay tho salaries and pensions of public servants. Naturally they want to know what thoso public servants are doing or have done. They also want to know why tho Public Service seeks (or sought) with its block vote to dictate to the Government. There is great bitterness about this. It is a legacy from tho long era of rising prices and prosperous times and Governments without the foresight that some, but by no means all, business firms exercise. Mr Forbes is going to investigate this. He is setting up a commission to inquire into Public Service expenditure. It may be objected that this is a shirking of duty. But it is preferable to have on such a body people who are not dependent on votes for their presence in Parliament. The “ depoliticalisation ” of the railways has shown already the value of this principle. For some time past it has been a matter of anxiety to us whether it was our duty to disclose many instances which have been brought under our notice in respect of Government servants who punctiliously attend their rendezvous with work and are perforce idle because there is no work to debut who, nevertheless, are drawers of Government pay. (And who can blame them?) But as, with the impending commission, the matter is really subjudice, there is a moral inhibition now on the disclosure of such confidences. It is almost inevitable that with a determination to rectify su.ch matters the Government should find itself unable to pursue any ambitious building programme. Foremost in that programme is the “ new ” Dunedin Post Office. It has hung fire for so long that it has now long gone past the phase of hope deferred making the heart sick. Tho Post Office is needed, its building would have revived the building trade here and absorbed much labour; but, if the sacrifice is necessary, it will bo borne without flinching or reproach.