EXCHANGE RATE DISPUTE

Greymouth Evening Star, 3 July 1933, Page 5

EXCHANGE RATE DISPUTE

N.Z. CURRENCY UNWELCOME STRONG ACTION IN LONDON [BY CABLE —PRESS ASSN.- —COPYRIGHT.] LONDON, July 1. • . The “Daily Telegraph” says that the Auckland City Council’s instructions to pay the interest due on July 1 on its tramway loan in New Zealand currency, has created an unfavourable impression in the city. No such instruction has been received for the July payments of other i Auckland loans. There are resentful holders who are likely to protest ito the Auckland Council. “The Times’s” City Editor says: “The gilt-edged market was unpleasantly surprised by an intimation that the interest coupons of the City of Auckland 51 per cent., Tramway Loan were being paid in New Zealand’s currency, thus resulting in their temporary omission from the Stock Exchange ofli.cial list.” • Referring to the Auckland loan interest, the “Financial News” describes , it'as'tlie riiipfet imptidefi,t"6xample;of k ‘alT for it is , a sheer subterfuge. .

The paper adds: “It is unfortunate that a conclave of Town Councillors should, by a hasty: act, cast doubt on the credit of New Zealand herself, which hitherto, has not faultered.” ’ < The “Financial News” in an editorial, says: “Auckland. city’s action is causing a widening in the quotations for all New Zealand securities, includ- '. ing the Government loans, by, two points.”' ' ’ . . “The Daily Mail” says: “The holders of the Auckland Tramway Loan have previously payment in accordance with the-wording >of the bond, this, apparently, giving them the option of receiving interest in sterling on London. Auckland’s decision is based on the fact that the debentures were originally issued in New Zea- _ land. Consequently, it is claimed ? that they are covered by the House of Lords ruling in the Broken Hill Proprietary case in January.” The “Mail’s” City Editor says: The fact that Auckland was advised it had no option but to pay in New Zealand currency, should’ be given the widest , publicity, otherwise the credit of Auckland, and even New Zealand will be jeopardised, which would be unjusti- ’. fled. •'

MR FORBES’ DISCLAIMER. LONDON, July 1. Mr. G. W. Forbes, commenting on the Auckland loan interest, said that the Government disclaims any responsibility' for the local authorities. Sir Thomas Wilford told the “Financial Times” that the Auckland matter had been taken up with his Government/ which "was now ' fully acquainted with the London views. BOARD CHAIRMAN’S DEFENCE. AUCKLAND, July 1. The Chairman of the Auckland Transport Board, Mr. Allum, in a statement on to-day’s London cablegram re the bond interest, said that the Board was merely, complying with the requirements of the law. He declared that if payment were made in sterling, the members of the City Council and of the Transport Board would be personally liable for the difference.

MAYOR’S STATEMENT. [PEE PBESS ASSOCIATION.] AUCKLAND, July 3. Statements concerning interest payments in Auckland loans are made by Mayor Hutchinson, and the Chairman of the Transport Board (Mr Allum). The position is that the City Council issued debentures for a £1,250,000 loan which was raised for the purchase of the tramway system. Approximately, £960,000 of this is domiciled in London. When, the Board took over the tramways, the debentures were retained by the Council, which makes interest payment by coupon, and is indemnified by the Board. The Mayor said that after the judgment in the Broken Hill Proprietary Case, the Transport Board notified the Council that it had hepn advised that in consequence of the judgment, future t payments must be made in New. Zealand currency. The City\ Council referred the matter to its solicitor, who advised that the Council had no power to object as long as the Board indemnified the Council against any loss or action that might ensue. > , “It is unfortunate,” said Mayor Hutchinson, “that the original debentures x remain in the name of”the City Council, although the liability was taken over by the Transport Board. What has happened is the direct result of the raising of exchange rate by the Government. The City Council is powerless in the matter. In my opinion, the whole responsibility must be accepted by the Government, which should grant an indemnity to enable the amount to be paid in sterling, pending the final legal decision.” Mr Allum said that the Transport Board were compelled by law to pay in New Zealand currency. That view was upheld by the audit department. He had not heard of similar complaints being made with respect to the Broken. Hill case, and did not see why his Board should be singled out. “As a matter of fact, the wider, issue has not yet been decided. The law at present stipulates that New Zealand currency must be used in paying interest on loans raised in New Zealand suctw as this tramways loan, but the Southland Power Board, is now applying for a declaratory judgment, which if obtained will compel it and other local bodies to employ New Zealand currency in paying interest on loans raised in London with the optional domicile of London or New Zealand.

MR. COATES RETICENT. WELLINGTON, July 3. Asked to-day to comment on the action of the Auckland Transport Board in paying loans interest in New Zealand currency, Mr. Coates said he preferred to say nothing at the moment. As to* whether a general payment of 7 interest by local bodies would haves y-> any effect on the exchange position, he said definitely it would have no influence at all.