Grey River Argus TUESDAY, September 4, 1934. RISE OF PUBLIC DEBT.

Grey River Argus, 4 September 1934, Page 4

Grey River Argus TUESDAY, September 4, 1934. RISE OF PUBLIC DEBT.

The Budget gave the public debt at more than £302,000.000 at the end of last financial year, which was about £20.000,000 more than it was a year previously. Yet Government apologists say the nett increase will work out at only about a million and a quarter eventually. It - is noteworthy, however, that the Budget does not hazard any estimate of the actual increase for the past year, leaving that to conjecture, which is doubtless a shrewder course than Io attempt Io prove for instance, that the increase has been but one-thirteenth of what it appears. The loan conversions entailed a capital increase of nearly half a million, subtracting which the debt increase, would only be three-quarters of a million in the estimation of those who refuse to include the floating debt in it. There was four and a-half millions borrowed, and three and three-quarter millions repaid in the long term debt, whilst the floating debt grew by nearly nineteen millions - on account of the high exchange. Treasury bills at the -teginnihg of last financial year totalled close on four millions, of which a million and a-half was on account of ordinary revenue transactions, and more than two and a-half on account of exchange. Revenue bills on March 31 last had grown to about three and a-half millions, whereas exchange obligations in the matter of debt rose during the year to close on nineteen and a-half millions. It is, of course, pointed out that when the Reserve Bank opened last month the greater part of the bills issued to cover the exchange indemnity to the trading banks were redeemed in the sense that the surplus sterling was “sold” to the Reserve Bank. It is a notor-

■* ious fact, however, that all of the capital at the disposal of the Reserve Bank is the half million subscribed by the shareholders, and 'whatever more capital the Government may find for it: It is an easy way of justifying Coalition finance to say that the Rc serve Bank bought the surplus sterling and so extinguished the State obligations entailed, but, as the Opposition Leader asked last week in Parliament, where does the Reserve Bank get the money to pay for the £23.500.000 ■sterling exchange of which it is made the proprietor? To complete the transaction there has to be found in New Zealand Re serve Bank notes no less than £28,520,000. Who has to find it? To whom will the Government go for it? The trading banks made advances to the Government equivalent to the vast inflation of Treasury bills, in taking over the liability for which the Reserve Bank incurred liabilities which can only be meantime met by the use of the public credit. At the same time, the public ar ,• not to become the owners of -the sterling assets of twenty-three millions at London to the credit of the Reserve Bank. The owners of those sterling assets are the .. Reserve Bank shareholders, and the Reserve Bank, to quote Mr Savage, is authorised by statute to create money in order to pay the exporters in return for its acquisition of the sterling assets Thus the floating debt is for the people a very real debt to a considerable extent, because it is from their credit, industry an 1 ■wealth that the money created by the Reserve Bank has to be made good. It seems that last year there was altogether the equivalent of £45.000,000 in New Zealand currency laid out in the purchase of sterling assets, and that means that at least nine millions in New Zealand money wi'l have to be paid by the people of the Dominion to liquidate the obligation to the exporters. So that if the public debt did not grow by twenty millions last year, it did increase by nearly half as much. The Budget did not set forth that aspect of the matter at all. The true position of the country is nine millions worse than made out. t It does not matter if Ihe discharge of this liability is spread over more than a year or two in the future. The point is that the people must pay. The question is whether they can go on doing so.