THE H.B. TRIBUNE THURSDAY, DECEMBER 10, 1925. NEW YORK AS LENDER.

Hawke's Bay Tribune, Volume XV, Issue 215, 10 December 1925, Page 4

THE H.B. TRIBUNE THURSDAY, DECEMBER 10, 1925. NEW YORK AS LENDER.

Yesterday the announcement of an Australian par loan issue of five million bearing interest at 5} per cent prompted some reference here to questions as to the amount of lending funds really available in London and the rate of interest likely to be charged upon them. By last night’s Sydney mail we had Australian papers in which the alternative of further recourse to the United States is discussed. This, in turn, is prompted by the recently announced decision of one of New York’s big financial institutions, the National City Bank, to establish a permanent agency in the Commonwealth. The bank in question is one of the great issuing houses of America, and was instrumental in the flotation of the two Queensland loans raised there some two or three years ago when, for quite good and sufficient reasons, the London market declined to entertain loan proposals from that State. The step that is now being * taken by it is regarded as an indication that American financiers consider that Australian Governments will have to come to them again for money, and as another

move towards fulfilling New York’s ambition to supplant London as the issuing centre of the world. So far as Australia is concerned —and . possibly New Zealand, too—the time looks particularly opportune i for the Americans to secure a footing. It seems fairly certain ( that Londbn loan funds are at a pretty low ebb, while it is quite certain that the requirements of both the Commonwealth and this Dominion will be urgent as well as substantial during the next few years at least. Under these conditions Australian financial writers arc beginning to consider, from a purely business point of view the possible advantages and disadvantages of borrowing in New’ York instead of in London. The New York bank, it is ' said, has expressed hopes that not i only Governments but municipalities ’ and other corporate bodies also will ! become its customers for American i dollars. Putting aside the matter of imperial sentiment, which is perhaps not so strong in Australia as in New Zealand, this will, f course ,depend greatly on the terms offered. Ono of the first points that borrowers in both countries would probably find themselves “up against” would be that of providing specific sinking funds. When New York recently lent the Federal Government some 75 million dollars no condition under this head was imposed, but that operation was one undertaken conjointly with London, and London probably insisted upon following its old practice of asking nothing of this kind from the oversea British dominions. It would, ! however, be quite different when ‘New York lenders had none but j their own customs to consult and, ' as with the Queensland loans ! already mentioned, an actively 1 operative and substantial sinking fund with regard to each individual , loan would be required. This, of ] | course, would be something quite I new to Australia and New Zealand, ! where, as yet. Government sinking i funds are of a quite voluntary { nature and have hitherto been but ! scantily applied to the actual rei duction of outstanding debt. Our I own Reform Government has during I the last two or three years made some move in this direction, but it i has been merely as profitable ■ opportunity offered and may not be i maintained. It would be different I in dealing with America, for the ' actual hard dollars would have to

be forthcoming on due dates for payment of both interest and sink-ing-fund instalments.

On the other hand, there may be times when, on account of fluctuations in international exchange rates, it might bo “good business” to borrow in New York rather than in London —Queensland soothed herself with that solace when, willynilly, she had to go to America. If the exchange should at the time be low, that is, if the pound sterling in terms of the dollar should be low, then it might be found profitable to raise a loan in New York and transfer the proceeds vo London. But such occasions as these would in all likelihood be comparatively rare of occurrence just at the moment when a loan was required. Generally speaking, with such a huge indebtedness to London already in existence and such big periodical payments to make there on account of it, and with our main body of imports still coming from the Old Country, though unfortunately dwindling in proportion, London is the place for us to got our loans so long as she can supply them. No doubt the Americans hope through lending to the dominions to secure there some collateral advantage in the way of an increased export trade, but it is to be hoped that, for us at any rate, both the volume and cost of imports from America will be diminished rather than increased. There can be no doubt but that the United States must of necessity get rid of a big proportion of her recently acquired wealth in the way of outside loans, but we should very much prefer, if possible, to do without any of them here. Two or three weeks ago President Coolidge told his fellow-citizens of the Great Republic that their big store of money resources was in no way due to the war, but to their own marvellous industry and energy. This, however, can have been merely a salve for his own and their consciences, otherwise how can he explain that before the war Britain held 1000 million pounds’ worth of American securities, whereas now she has practically none and owes the United States nearly as much, while the Continental Allies among them owe her still more ?