N.Z. LOAN CONVERSION

Grey River Argus, 5 September 1939, Page 5

N.Z. LOAN CONVERSION

HARSHER TERMS CRITICISED Comparisons With Foreign Countries MADE BY MR J. O’BRIEN, M.P. Speaking on the Budget, Mr James O’Brien M.P., compared the treat ment of New Zealand in the. reeen £17,000,000 loan conversion, with tnai which was meted out to other countries—countries, some of which that borrowed may be our enemies. He pointed out that Italy and France had been most favourably treated regard to their war loans, and that money had been advanced to Czechoslovakia as a gift, and that even Germany had received about £300,000,000 in loans since 1924. Herewith portion of his speech: — Mr Speaker, the Oppositron has, right through the debate, been telling us what favourable terms we converted the £17,000,000 loan which is falling due. We got the money at 3i per cent. I do not believe there is one hon. gentleman opposite who really thinks it was a good deal that we got. The Hon. Mr Hamilton: The hon. gentleman’s own Minister said that. Mr O’Brien: I do not think he did. We have to pay off £1,000,000 on maturity, £2,000,000 in 1940, and £3,500,000 each year for four years, in addition to what we are paying at the present time. Then we have loans aggregating £100,000,000 falling due in the compraatively near future. Supposing those loans were subject to the same terms. Could any Government stand up to the task of meeting them under similar conditions. Perhaps w 7 e had a right to expect better treatment from Great Britain than we got. I am one who is not afraid to say that anyhow. I have an article from the Financial Times, written by Professor Murphy, who, I think, is the good old economist the Opposition takes a lot of notice of. Anyway, Opposition members are very fond of quoting him. A very sound man is Professor Murphy, so the Opposition says. This is the article which appeared in the Financial Times:— “It. was apparently to pay ott £1,000,000 on maturity and arrange the balance subject to redemption of a further two millions in 1940, and thereafter three and a-half millions in each of the four following years. Just what arrangements have been made to assure success on this basis is not clear.” Then he goes on to say further:— “The trouble, however, is that it constitutes an undesirable precedent for future maturities, of which several are due in a short, time, while it seems to load our balance of trade with an impossible task.” He says further: —“Mr Nash has doubtless done his , best to cope with the London consequences of his own policy, but he has not secured us much in the way of concessions and his arrangements cannot in the absence of economic miracles, be of permanent nature. The conditions are onerous if not definitely harsh. That is Professor Murphy’s opinion. Let us examine the figures relating to other loans made by Great Britain. In a British publication “Public Opinion,” for 7th July, 1939. Mr Ralph Assheton says:—“The total nominal amount outstanding of foreign stocks and bonds, and foreign securities in the Official, and Supplementary lists is £3,354,646,172, and the market valuation at March, 1939 was £620,768,432. On the basis of that valuation not far off £3,000,000,000 has been lost by the investing public in foreign investment —a great deal of it irretrievably. CJn the other hand the total nominal amount outstanding of Dominion, Provincial and Colonial Government stocks and Dominion and Colonial railways is £1,176,099,675, and the market valuation at the same date was £1,047,709,838, this means that £128,000,000 has gone west, for a period of years.” The hon. Mr Hamilton: The hon. gentleman will not shed any tears over that.

Mr O’Brien: The point I am making is that huge overseas investments by Great Britain resulted in great loss, and yet New Zealand, a part of the Empire, has had to submit to harsh terms despite the fact that she is paying interest on every penny she ow-es, and has kept the terms of every agreement she made.

The hon. Mr Ransom: What is the matter with the Government when the Minister of Finance cannot make better terms ?

Mr O’Brien: Oh, it is the Government now that is at fault. Would the hon. gentleman advocate the ruthless cutting down of pensions and wages as a past Government did merely because Sir Otto Niemeyer told it to do so ? Are harsh terms being imposed on New Zealand because New Zealanders are at last enjoying a standard of living equal to or better than that of any other part of the world ? Must we cut the wages and pensions of the poorer classes of the community at the behest of the money-lend-ers in Great Britain ? Let us look at the terms granted by British interests to foreign Governments. Before I make that comparison, I am bound to say that if the terms recently imposed on New Zealand are inflicted on future Governments in respeef of loans falling due later on, they will have no option but (o default. In regard to advances by Britain to foreign countries it is interesting, to note that France owed Great Britain £600,000,000, and Great Britain cancelled 62 per' cent, of that debt. In other words she cancelled a debt of £372,000,000. The hon. Mr Hamilton: Does the hon. member know how much New Zealand has been saved by a similar arrangement ? Mr O’Brien: That is a different thing altogether; that was the effect of a moratorium.

The.hon. Mr Hamilton: But we have been saved interest on £24,000,000. Mr O’Brien: That is a different thing altogether. That started with the Hoover Moratorium and it is worthy of mention that although the agreement between Britain and the United States of America was signed in 1923, New Zealand did not get any advantage until 1931. .We paid 5 per cent, while Great Britain was getting the money for 3A per cent. The hon. Mr Hamilton: In effect we

are getting £24U00,000 free of interGS Mr O’Brien: That is because Great Britain is not paying any interest o the United States of America. We will come to that later. The ipmains that a debt by France < f £6OO 000,000 was reduced to £--8,000 00 Italy owed Great Britain and Great Britain cancelled 86 percent of that debt or £481,600,000. Today Italy owes Great Britain only £78,400,000. Mr Lee: A nice friendly countrv . Mr O’Brien: Yes, a friendly country to-day. Who knows what is going to happen in the future We do not know how much money Great Britain loaned to Germany. The hon. Mr Parry: Perhaps they lost count. Mr O’Brien: They took no count nrior to 1924, apparently. We know that Germanv borrowed £2,500,000,000 really 25,000.000,000 million marks. The market value of the mark is approximately 2s. Mr Dickie: No, Is. Mr O’Brien: No, I think it is about 2s. The rate ranges from 9 to 11 marks to the £l. If the hon. gent eman cares to look up the figures if will find that that is so. Great Britain lent 12 per cent, oi the total sum borrowed on long-term and about 18 per cent, on short-term. It would be safe to assume that she lent Germany about 15 per cent, of the £2,500,000,000— over £350,000,000 —lent this amount to “a good friendly country.” We come to Czechoslovakia. After the Munich Agreement was made, Great Britain and France between them, lent Czechoslovkaia £16,000,000, £8,000,000 was a gift, because the Germans were allowed to walk in and take portion of the country. Incidentally, however, only about £6,750,000 had'been spent when the Germans walked in. So we see the terms given to other countries. The British bondholder- has not got his money back in those cases, although he has got every penny that New Zealand owes, or is likely to get every penny. And yet we have these harsh terms so far as our conversion is concerned. Great Britain borrowed from America about £860,000,000, and, after the Hoover Moratorium was given in 1931—after a year’s holiday was given in the matter of interest payment— Great Britain actually defaulted. The conditions were such that Britain could not pay, and she has not paid. She makes a small token payment, now and then, probably a pound or two. to keep the debt alive. The hon. Mr Hamilton: It was not her debt, was it. ? Mr O'Brien: Of course it was her’s ! She lent money to her allies. She borrowed from America and lent to France, Italy, Belgium and other countries, and, when they defaulted, Great Britain could not meet the debt. I hope that honourable gentlemen opposite will think of that and not talk so much about the fine terms we are getting.