AUSTRALIA’S LOANS

Greymouth Evening Star, 9 October 1926, Page 5

AUSTRALIA’S LOANS

ADVERSE HOMELAND CRITICISM.

Australian and N.Z. Cable Association)

LONDON, October 7.

Mr Sydney Russell Cooke, a stockbroker, and Mr F. H. Davenport, have issued a pamphlet “dedicated to the Imperial Conference, 1926,” entitled “Australian Finance,” in which they strongly criticise Australia's loan methods and her expenditure of loan money. They ask: “Is the system safe? Are the trustees justified in continuing to hand over a large proportion of the nation’s savings to such reticent, pertinacious borrowers? In fact, is Australian finance sound?” The pamphlet, instances losses in connection with the Commonwealth oil refineries, and the Commonwealth

shipping line, and states; “It is clear that part of the loan raised in London is sometimes applied to purposes productive only of losses to the States, and sometimes to purposes damaging to the commercial firms in which the British investor is directly interested. The Australian States, so car, have failed to make proper provision for the redemption of their debts. It is clear that, apart from her war debt, Australia, as a whole, has not made a serious attempt to reduce her heavy indebtedness to this country. It is often imagined that the Colonial Stock. Act, of 1900, carries some protection for the investors, and that all the Colonial prospectuses are examined by the Treasury officials, who assure themselves of the necessity for the loan and of the security behind it. As a matter of fact, no such examination is made. It may be

difficult to alter the 'law, but it should not be difficult for public opinion, in this country, to compel the Australian Government to satisfy the accepted code of financial ethics when they borrow money from London. It is generally claimed that the increase in the Australian borrowing is due chiefly to the war. It is true that Australia’s net debt in the war period was increased by one hundred, per cent. Nevertheless, it has .increased by fifty-three per cent since 191’8.” .The pamphlet declares . that .Australia’s total net debt in 1925, is equivalent to £164 per capita, as compared with Canada’s £6O per head.. Characterising Sir Joseph Cook’s letter of September 12, as “loose words” the pamphlet asserts that the Australian Government and Municipal iroperty was valued at 656 millions, whereas the net debt was 828 millions. It says: “The Australian prospectuses should give full particulars of the condition of the borrowers’ finances, and should make proper provision for a sinking fund, by means of drawings or purchases, and should give a schedule of the items on which the money will be spent. Until these reforms are carried out, it is doubtful if trustees are justified in regarding the Australian loans as secure investments for the funds they are required to administer.” •

Sir Joseph Cook said:—“This pamphlet is full of inaccuracies. Steps will be taken to reply effectively. This is one of many writings of a most mischievous kind, that are now being broadcasted on the eve of the Imperial Conference. They show an execrable spirit. Luckily, there is a complete reply to all the statements.” A detailed reply is expected to be issued next week, after Sir J. Cook has conferred with Air Bruce.

“SPOILING THEIR WELCOME.”

LONDON, October 8

The “Alorning Post’s” financial editor say& that, apart from Messrs Cooke and Davenport's pamphlet, the monthly report of a' leading firm of London stock brokers sets out, in detail, the Australian loans maturing in 1927, totalling 118 millions sterling, of which £27,600,000 are held in London. The report goes on to suggest that, “if discrimination is to be exercised in overseas loans, as ah effect of tile coal stoppage, it is clear that Australian loans for new works should be withheld. A flood of Australian loans in 1927, for conversion purposes, can hart|ly be avoided, but they should be accompanied by full information, and by the provision of sinking funds, thus helping to prevent over-borrowing, and unsound borrowing.”

The • “Alorning' tost” adds: “The trustee privilege makes it specially important that the Australian States should not expose themselves to the risk of spoiling their welcome in London.”