The Gisborne Times FRIDAY, JULY 3, 1936. LABOR’S POLICY IX REGARD TO OVERSEAS DEBTS.

Gisborne Times, Volume LXXXIV, Issue 12904, 3 July 1936, Page 4

The Gisborne Times FRIDAY, JULY 3, 1936. LABOR’S POLICY IX REGARD TO OVERSEAS DEBTS.

The latest disclosure in regard to 1 the Government’s financial policy i" to the effect that investors at Home who hold New Zealand bonds are i o bo invited to accept interest at a lower rate. Already, there is a great outcry at Home on tin* matter and the announcement has not proved helpful to the Dominion’s credit, in I making, the announcement, Mr. Savage said that, in the light of the changed economic conditions, the interest rates which apply .0 the Xew Zealand overseas debt are no longer equitable. There is. of course, no lack of modern precedents in the matter of having interest reduced. But none is on all fours with the proposal in question, in this connection, it may be recalled that Britain, some years after the close of the Great War. reduced the rate of interest which she was charging her Allies on moneys lent to assist them in carrying on their part in the titanic struggle. Especially was France favored under this particular heading. As far as this Dominion was coucernel, its war debt to the Motherland was funded and the interest rate was reduced. Within this Dominion itself, the Coalition Government insisted upon New Zealand investors accepting a reduced rate of interest on Statebonds, not as a gesture of goodwill, however, but on the score of expediency in that national economy required to be exercised. W hat Mr Savage and bis colleagues are intent on stressing is not only that overseas interest can be met only by exports but (bat. as values of produce are now lower than when the debts were contracted, a larger volume must needs be sent abroad to fulfil interest commitments and. therefore, the interest rates being charged cannot be justified. 111 other words, it would appear, on the surface, that the Tabor policy amounts to this: that, when a loan is raised, the contract should provide that interest should vary with the fluctuations in market prices for primary products. It so happens, however, that neither this Dominion nor any other country has. as yet, sought a loan on that particular basis. It might be asked why the Coalition Government did not attempt to have its internal interest reduction policy applied to loans domiciled abroad. The answer is, , however, not far to seek. What the Coalition leaders ielt was that, if they approached the Dominion's creditors at Home with such a proposal, it might not prove acceptable and, what is more, it might lead to deterioration pi New Zealand s credit oil the London money .market, making it impossible lor the Dominion again readily to borrow overseas. On its part, the present Government makes it clear that it is not its intuition to • repudiate any of the principal. But the fact remains that its plan would carry with it repudiation ot portion of tho interest agreed to be paid; Investors at Heme are, unquestionably, . entitled to complain that this Dominion would not have offered to raise the rate of interest on an overseas- loan during its curreney hud primary products soared in value and a much: smaller quantity needed to be exported to meet the interest bill. Doubtless, if the loans in question had been, issued -to this J)bminion.'.by the British Government, thero would be a reasonable chance of the granting of a request that the interest, rate bo reduced. -As; for Mew. Zealand’s private creditors at Home- they are. clearly, hostile to the suggestion that they should accept, leas , interest..than was . agreed to be paid,, and -■more especially in view of ,tho, fact that, .it, Js the. avowed intention of. tho Labor Government m this-. Dominion- not to raise any further loans overseas, and that it is enhancing national costs.