PUBLIC DEBT REDUCED OVERSEAS

Grey River Argus, 19 August 1949, Page 7

PUBLIC DEBT REDUCED OVERSEAS

WELLINGTON, Aug. 18 The Hon. W. Nash in his Budget speech to-night said: The major transaction in the British debt was the adjustment necessitated by the bringing of New Zealand currency to parity with sterling as determined in August of last year. Since 1943 the London debt has been recorded in the accounts at 25 per cent, more than sterling value. It will now be recorded as at parity with sterling. The alteration in the rate of exchange has reduced the London debt in New Zealand currency by £20,797,000. The annual payments of interest in London will now cost correspondingly less in New Zealand currency. The moneys available in the Consolidated Fund were insufficient to pay to the Reserve Bank of New Zealand the liability arising out of the provisions of section 4 of the Finance Act, 1934, consequent upon the exchange alteration. Authority was obtained in section 2 of the Finance Act, 1948, to raise the funds necessary to meet the liability, and stock to the value of £20,000,000 was issued to the Reserve Bank for this purpose. The year’s transactions included a 3 per cent. £16,000,000 conversion issue in London to take advantage of an optional maturity of a 41 oei’ cent. £19,225,465 loan. Of that amounf £225,465 was repaid, and the balance of £3,000,000 was transferred to New Zealand domicile. Details of the issue were included in last year’s Financial Statement. Two internal loans of £3,761,485 and £3,492,230 which matured during the year were repaid on due dates. The domicile of the public debt as at March 31, 1949, was as follows:— Amount Per Cent. London 79,962,101 13.0 Australia 628,226 0.1 New Zealand 534,395,305 86.9 £614,985,632 100.0 The figures exclude the amount of the funded debt relating to the 191418 war. The floating debt in the form of Treasury bills included in the above figures remained at £55,000,000. It will be noted that 13.1 per cent, only of the debt is now held overseas. A conversion offer of £7,000,000 made on June 1 last in respect of a £7,322,579 31 per cent., London loan was very successful ,and cash applicants received small allotments only. The balance of £322,579 was repaid in cash.

In New Zealand arrangements were made to redeem, on June 15 last, two 25 per cent, war loans totalling £16,806,940 and a 4 per cent. 1933 conversion loan for £12,432,440, totalling in all £29,329,380. Securities issued to those who wished to convert their holdings to new investments were 25 per cent. 1954-55 stock and 3 per cent, stock maturing 196164. Investors in loans totalling £15,111,380 elected to convert to the new stocks, while holders of the old loans amounting to £14,128,000 were repaid in cash. The only other overseas loan requiring action M in this financial year is a London loan of £7,500,000 which matures on December 15, next. Since 1936 the average rate of interest on public debt has fallen from £3 19s Id per cent, to £2 14s 4d per cent. Over the period for which estimates of national income are available —that is, since 1938-39 —the burden of debt, defined as total interest charges ,has declined from 5.9 per cent, to 4.0 per cent, of the net national income; and this over a period of expenditure upon war unprecedented in New Zealand’s history. The Government’s policy regarding overseas debt has resulted in a. reduction since March 31 1936, of £52,558,000. The annual interest on this debt has been reduced during the same period J from £5,725,000 sterling to £3,273,000 a net reduction of £2,452,000 sterling annually. This reduction is in addition to repayment of all moneys made available by the United Kingdom Government in respect of the 1939-45 war amounting to £48,667,000 sterling. Although the sums mentioned have been repaid we are producing more than ever before and are able to import mor e goods, because of the reduced charges on our export receipts. To-day our standard of living is higher than in any previous period, and instead of mortgaging the future we have freed a considerable portion of our future earnings from unproductive charges. Whilst this debt redemption policy has been followed sucessfully it is not proposed to extend it in a way that will restrict, the major capital development works, which are essential to the expansion of production. LOAN MONEYS REPRESENTED BY ASSETS From March 31, 1936, up to March 31, of the present year, the public debt has increased from approximately £256 million to £615 million, x a net increase of £359 million. During the same period New Zealand has borne its share of the cost of the world’s greatest war, in respect of which almost £204 million of debt has been incurred, in addition to huge sums expended from current taxation. Deducting £204 million from the increase of £359 million over the period, we have a remainder of £155 million of debt represented by productive or useful assets. These are as follows:— £ (Million) Housing.. 49 Hydro-eelctric schemes .. .. 26 Railways 21 Roads and highways 18 Bank of New Zealand .... 7 Airways, phosphates, and other undertakings .. .. , 5 Land settlement, coal mines, Post Office facilities, irrigation, and State forests 22 Public buildings, including schools & hospitals .. .. 16 £164 This excess of £9 million in value of assets over relative loan debt arises largely from repayment’ of debt in the interim, and the excess might be increased by bringing into account capital expenditure from reserves and from revenue.. The point I desire to emphasise, however, is that when war debt is omitted we can show against a. net increase of £155 million in debt a total of tangible assets, some of them highly productive, at least £9 million greater than that increase in debt, even when those assets are very conservatively valued. There is obviously every reason for confidence in New Zealand Government securities as per mane nt investments.