UNPLEASANT SHOCK

Gisborne Times, Volume LXXXIV, Issue 12904, 3 July 1936, Page 5

UNPLEASANT SHOCK

REDUCED INTEREST ON N.Z. LOANS. LONDON FINANCIERS PERTURBED. - “OUTSIDE ACCEPTED RULES OF FINANCE.” “CANNOT EXPECT INVESTOR TO PAY.” (U.P.A. hy Elec; Tel. Copyright). LONDON, July 1, Tho |City is disturbed; at , .reports that, Mr W T . Nash, the . New Zealand Minister .of Finance, will seek a reduction in the ‘interest on New Zealand loans. , / Tho “Star” declares that the new proposal is outside the (accepted (rules of finance, and comes as an unpleasant shock.. - j .7 . QuotpLions for. New Zealand stocks Mere .nominal as a result- of an announcement of the New . Zealand Prime Mblister, Mr-AI. J.- Savage, which met with an unfavorable reception in the City, -where, it is pointed out,- New. Zealand cannot expect the investor to pay because she . has not the good , fortune to have more, loans for redemption during tho present cheap money period. ■ Tho “Star’.’ declares that Mr.‘Savage’s . phrase,- “Mr Nash will bounce tho hall when he gets to London,” sounds like the intrusion of an ugly form of bodylino into the investment market.

STOCKS FALL IMMEDIATELY STATEMENT MUST-BE DETRIMENTAL TO N.Z. FUTURE BORROWING WILL BE AFFECTED (U P.A. by Elec. Tel. Copyright). • -LONDON, July 2. The City editor of the Daily - Telegraph describes -as disturbing the intention of the New Zealand. Minister ofi Finance, Mr \V. Nash, to request a reduction of interest on New Zealand loans.

Tfc is pointed out that the announce meat of' the. intention immediately affected New Zealand .stocks, an allround fall of two points taking place and dealers widening . quotations. Well-informed people are of the 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 recently was high I ’, continues the Daily Tele-graph. “It is difficult to believe that Mr Nash will ask English bondholders' to curtail their existing rights. It would seriously; affect New Zealand's, status and jeopardise future borrowings and conversions. “An explanation can probably be sought in the sphere of local political controversy, and,an uniiistracted• popular clamour and demands that the conversions 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 Na'sli will have wiser second thoughts before his arrival.” . *. The City editor of the Times says it is not surprising- that th’c stock markets) are uneasy and quotations a-re lower. “It is l a. pity that New Zea land credit should be injured by suggestions. of interference with contractual obligations”, says the Times. CITY SHOCKED TO CORE POSSIBILITY OF DEFAULT JUSTIFIED FALL IN STOCKS BONDHOLDER WILL NOT AGREE ■The City . Editor o‘. : ’ the - Ncw-s- ---( lu civicle onyx. that, when a threatened defaulte-”- is a State or .leimicipaiity of the British Empire, as liappciiiS too l frequently nowadays.- the City 'it shocked to its Imperialistic care. The remarks of Mr Savage are regarded .as •something' less than a- threat of default, but the possibility of delaidt following the bondholders’ refusal seemed sufficiently near to justify a heavy fall in tire price of stocks and long-dated loans. All fell three points “Mr -Savage will avoid disappointment if lie) realises that- there ts no possibility of) the bondh oldens acceding to his request”, continues 1 the News-Chronicle. .“The added cost, of debt’ service is due to New Zealand, deliberately and without Australia’s urgent necessity, depreciating the value of her currency. New Zcala’ud waci not asked to pay unduly : ates when the loans Were raised.. She has always enjoyed the ' substantial preference accorded to Dominion borrowers. PRIME. MINISTER’S REPLY PART OF 'GOVERNMENT'S ELECTION PLEDGE NO INTENTION OF REPUDIATION WANT TO MEET CREDITORS AROUND TABLE MER ELY, • EFFORT- TO. TR Y TO .HAVE ADJUSTMENT Tress Assoc!.• . A a WELLINGTON, duly ,2. W ; -The point .tJrat.'.iti. was iptct- of the Govern mentis election-pledge to endeavour to make an effort to have a readjustment of New Zealand’s overseas obligations, was emphasised,, by the Prime Minister, to-day, .when he was /shown the cable, messages ~ 0915* minting on his ‘statement :pf -yesterday that it,was the Government’s 'intention to open negotiations in : England with a-view ,tp. bringing ahoutya more equitable,., bq’isis j for,, . interest charges between (lie Dominion'; find the Old Country.

’ : ‘ ■ 'V ~ I < ~. s'. '' I', ~, ‘‘Tlfcy'e.Jravc-put. piit thp' point that suit-8 their own book”,, said- M.’ SAfage. -.“I .said that we’,are going do deal fairly . with,them, -but it mus,t ba I'CflU ised, that we. have,obi,■gatjons., lit New Zealand, as well as.overseas,-and tlijtt w.o. could not. afford to ,cut down ,our Obligations in Ifew, Zealand ,in order to 1 niako impossible,,for Us,to keep up to, the ,nominal, .conditions . of. agreements made when the. relationship botvpeen money and other-things- was qiuitii,’different from what.it is . today. We. have, no intention of repudiating anything"hut. it must be realised that, measured in exports, we are paying, double to-day what we were paying l when tlio loans were raised. ... - ,

“It i,s perhaps unfortunate that wc have to discuss' these things in public”, lie continued, “but anybody who knows anything, of the economic problems, wo, are facing will .readily understand the justice, of our case. If we cannot make arrangements, we can't,, but surely, it L; no offence to talk about them. Wc want to meet our creditors around the table with a view to making some arrangement possible. If they think we are going on in the rut we u'o .now in, they have go some more thinking, to do. My statement was actually only ai suggestion for ail arrangement,’ ’ Mr Savage referred to interest rates generally and sa-d there had been a reduction all round in England,. and.also in New ,-Zealand ; so far as .local loans were concerned, but he indicated that the overseas Dominions were still paying on a higher scale. New Zealand wished to be put ont the same basis as the borrowers in England were. “We will stick to the spirit of our agreements from beginning- to end’’, said Mr Savage, “but when dealing with money questions the relationship between money and other commodities must be taken into account and surely it .is not too much to expect that we are go-'ng to have some adjustment in respect of nominal, rates. We are going to try to do that. That was what- my statement yesterday- indicated,”