N.Z. LOANS TO OVERSEAS

Greymouth Evening Star, 2 July 1936, Page 9

N.Z. LOANS TO OVERSEAS

“BOUNCING THE BALL”

MR. SAVAGE’S INTIMATION

[PER PRESS ASSOCIATION.]

WELLINGTON, July 1

The definite announcement that the Government intended, in the near future, to make representations to the money interests abroad, with a view to securing that New Zealand overseas interest commitments shall be placed on a more equitable basis, was made by Rt. Hon. M. J. Savage, today.

‘‘We do not want to repudiate anything,” said Mr Savage. “We want to pay those to whom we'are indebted in, a fair and square way. 1 do not think that the British bondholder has been treated badly, and he will not be treated badly by us. We want to pay’ twenty shillings in the pound —but we do not want to pay’ twenty-one shillings, or twenty-five! We are paying more than it was intended that we should pay when the agreements were made.” The Prime Minister pointed out that agreements here were being broken in order to satisfy creditors abroad. "I say we must satisfy our creditors everywhere,” he said. Mr Savage added that Hon. Mr Nash would “bounce the ball” when he got Home. "We could only pay for things abroad with our exports.” SERIOUS EFFECT IN LONDON STRONG PRESS CRITICISM (Received July 2, 10.30 a.m.) LONDON, July 1. The city is disturbed at reports that Mr. Nash will seek a reduction in interest on New Zealand loans. “The Star” declares: The new proposal is outside the accepted rules of finance, and comes as an unpleasant shock. Quotations for New Zealand stocks were nominal, as the result of Mr. Savage’s announcement, which met with an unfavourable reception in the city, where it is pointed out that New Zealand cannot expect the investor to pay because she had not the good fortune to have more loans for redemption during the present cheap money period. “The Star” declares: Mr. Savage’s phrase, “Mr. Nash will bounce, the ball when he gets to London,” sounds like the intrusion of an ugly form of bodyline into the investment market. The “Telegraph’s” City Editor describes as disturbing Mr Nash’s intention to request a reduction of interest in New Zealand loans. This immediately affected New Zealand stocks, an all-round fall of two points taking place. Dealers are widening the quotations. Well-informed people are of opinion that the statement was designed for home consumption, and need not be taken too seriously. Nevertheless, such a statement must be detrimental' to the Dominion’s credit in London, which was recently high. It is difficult to believe that Mr Nash will ask English bond-holders to curtail the existing rights. It would seriously affect New Zealand status and jeopardise future borrowings and conversions. An explanation can probably be sought in the sphere of local political controversy and uninstructed popular clamour, and demands that the conversion recently applied to internal loans should be repeated in London with New Zealand’s overseas debt. Moreover, Australia’s spectacular conversions have greatly impressed the Dominion. It is hoped that Mr Nash will have wiser second thoughts before his arrival.

“The Times’?” City Editor says: It is not surprising that t*he stock markets are uneasy and quotations lower. It is a pity that New Zealand credit should be injured by suggestions to interfere with contractual obligations. The “News-Chronicle’s” City Editor says: When a threatened defaulter is a State, or a municipality of the British Empire, as happens too frequently nowadays, the City is shocked to the Imperialistic core. Mr Savage’s remark is something less than a threat of default, but the possibility of default following the bondholders’ refusal seemed sufficiently neai- to justify a heavy fall in the price of stocks. The longer-dated loans all fell three points. Mr Savage will avoid disappointment if he realises there is no possibility of the bondholders acceding to his request. The added cost of the debt service is due to New Zealand deliberately and without Australia’s urgent necessity, depreciating the value of currency. New Zealand was not asked to pay unduly high rates when the loans were raised. She always enjoyed the substantial preference accorded to Dominion borrowers of probably one per cent.