UNITEDS' FINANCE

Hawera Star, Volume XLVII, 19 October 1928, Page 7

UNITEDS' FINANCE

“BORROW BOOM AND BURST.”

POSTERITY CLEAN UP PIECES,

PRIME MINISTER’S CRITICISM

(By Telegraph—Special to The Star.) DUNEDIN, Oct. 18. A policy of borrow, boom and burst, with .posterity left to clean up the scattered fragments, was the description applied by the Prim© Minister tonight to the main plank in the platform. of th© United Party, "as outlined by Sir Joseph Ward in his speech at Auckland. Mr Coates said that it was difficult to believe that any party with a pretence to political wisdom or a knowledge of the requirements of New Zealand would suggest seriously that this country could stand up to the borrowing of £70,000,000 in on© year. it was more difficult to believe that such a, proposal could emanate from Sir Joseph Ward, who had hitherto, lost no opportunity of criticising the Government for borrowing money for reproductive .public works. “If we agreed to such a .suggestion,” said Mr Coates, “we would have disaster and a repetition of the effects of the Julius Vogel policy, When New Zealand lost, in a short time no fewer than 14,000 of its population by migration. Our credit would be gone, and very soon we would be at the end of our tether. It would be a case of boom and burst.” The Prime Minister pointed out that taking into account the increasing production in all parts of the world, prominent economists and financiers had suggested the possibility of an easier range of prices. Heavy borrowing at a time when prices were high could lead only to disproportionate burdens on those who had to.find the interest when the values of produoe fell. Moreover, qo one could deny that it was unwise to. go in for heavy long tenn boarowing, when the interest rates were at such a high level as they were now. The London money market bad always been ready to provide New Zealandwith the finance required for its development works, but it bad said distinctly that it was adverse to. lending money for relending purposes. “I wonder how the financiers and investors there would view the proposal to borrow £60.000,000 for relendmg, and what would be the effect on our credit!” asked Mr Coates. Sir Joseph Ward's plan was to borrow at a rate equivalent to five per' cent., and to re-lend that money through the State Advances Office* to settlers and workers at four t 0 five per cent. The Prime Minister asked who. was to pay the costs of floating the £60,000,000’, the costs of administering, the re-lending and repayment operations and the extra-quarter of one per cent, that would have to be made up on the interest.

DISASTROUS RIESUDTS PREDICTED.

The provision of such a large amount of money would be certain to result in an inflation of land values and New Zealand had had too recent an experience of that to desire a repetition ot it. Another disastrous result that would follow the importation of such a large amount of money would be the effect on the rate of exchange. Mr Coates said that our last difficult exchange problem after the war, brought down the prices of all our produce and i!b then cost in exchange only Is 2d per head to put 'our iambs on the English market. The adoption of Sir Joseph Ward’s proposal would break down the exchange system,- and consequent evil effects on the prices of all our primary products. “Goodness knows,” said the Prime Minister, “our farmers have had a difficult "enough time without any : on© suggesting that we should add to their trouble,” . - : •

THEN AND NOW

The speeches made by Sir Joseph Ward in Parliament eve re referred to by Mr Coates 'to show that Sir Joseph’s ■latest remarks on the subject of borrowing represented a complete change ‘of front in a year. Speaking on the Imprest Supply Bill in September, 192/, Sir Joseph Ward said “Somebody has got to alter the system of finance m this country, because we cannot possibly afford to .go on in the present profiiouite fashion, importing money from abroad at the rate of £18,000,000 in two years.’’ The Prime Minister said that Sir Joseph Ward has, made no reference to the fact that in that yeai the Government had reduced its external borrowing by £4,000,000 m comparison with the previous year and that in any case the whole of the \ money raised overseas had been allocated .to reproductive public works. "If Joseph Ward calls our borrowing profligacy,” said Mr Coates, “what term is he* going to apply"to his own suggestion to borrow £70,000,000 an one year?” ( “Here i.si another of his speeches : ‘I have never known in the 'history of this country the prodigality in connection with borrowing in such a short space of time and if there .is any Ihonourable nwmbir who can look with, equanimity •nt wlrfit is going on in this country, then afll I can say is that he takes uv> an entirely different attitude from royself after thinking the, matter out “I’ll leave the leader of the £/o.<Mi 000 boom and burst party to explain this extraordinary somersault m tl;c arenai of financial gymnastics, ..sam Mr Coates.

R ATT/WAY CONSTRUCTION

Dealing with other aspects of Sir losep.li Ward’s .speech, the Primp Minister said that it was not practicable to give effect to Sir Joseph. Ward’s ..contention that the uncompleted railway lined could be finished in' thnse yeans. Apart from the financing of sucili rapid work, it would be impossible to go ahead so quickly with the available man-power in New Zealand. The Government had laid down a policy for tee H-mr.'!3t,:.on of the railways and. other iv'Wic works in their order of oramey, 'Mid this policy had received the endorsement of the people. Apparent v P;ir Joseph Ward’s idea embraced tbs? financing of some of the works bv the. iss’m of bonds to the contractors. Uf had that suggestion. in t>e Taurauga. by-election in 1923. and >e had then lycen effectively dealt with, bv the late Mr Massey. Such an issue of bonds would lie a, forced issue of uancr that would destrov the- local market for our .stock .and iniure our- credit hero and abroad. It would prevent the evs•iam of labour contracts now in force on the oo t operafive princ.-nle on our pub l? worlfw. Tt would also increase the wdr ,~. e f.bc works and leave a multitude of unemployment at the finish.

THAT SURPLUS

Si,.- Joseph Ward bad devoted some attention to the question of the surpyus and bad stated that the surplus of £17.000.000 which he had left when lie went cut of office had gone. _ Tne Prime Minister remarked that Sir Joseph Ward did not tell the people how