THE PUBLIC DEBT

Hawke's Bay Tribune, Volume XVIII, Issue 201, 8 August 1928, Page 9

THE PUBLIC DEBT

£251,396,252 AS AT MAR. 31 STEADY REDUCTION IN NET INCREASE, FINANCE MINISTER’S STATEMENT. Referring to the Public Debt in his Finance Statement presented in the House of Representatives last evening, the Minister of Finance, the Hon, W. Dowme Stewart, said;— “The gross public debt as at the 31st March, 1928, amounted to £251,396,252, a net increase of £5,545,363 during the last financial year. “In round figures, the net increase in the debt for each of the last three financial years was as follows: £11,000,000 in 1925-26, £7,000,000 in 1926-27, and £5,500,000 in 1927-28. These figures clearly demonstrate that the Government is proceeding resolutely with its declared policy of steadily reducing the annual net increase in the debt, without, however, in any way hindering the progress ol the large capital works at present under construction.

“The new loans raised during the year totalled £8,022,499, of which £6,166,749 was raised in London, while the balance represents the proceeds of the usual local sales. “A total of £6,996,749 was allocated to the Public Works Fund— General Purposes Account, Electrio Supply Account, Railways Improvement Authorization Act 1914 Account, and other accounts from which the capital works previously referred to were financed. “A sum of £890,000 was made available for the State Advances Office, part o> the amount being used to start the New Rural Advances Branch. The balance of the new loan money was raised tor afforestation and other purposes. “As a set-off against the new loans raised, debt to the amount of £2,477,136 was redeemed during the year, as follows:—New Zealand £1,960,620 Australian £48.600, London £467,916; total £2,477,136.

‘'Concerning local public debt, I would like to draw attention to the fact that the redemptions

exceeded new loans raised in the Dominion by approximately £lOO,OOO. This means that, in. stead of absorbing any portion of the local capital supplies, the debt-repayment policy had the effect Of augmenting the resources of the local market. “Gross debt as at the 31st March, 1928, was held as under;— Where held. Amount. £ New Zealand 107,470,429 Australia 4,168,850 Loudon 139,756,973 £251,396,252 Gross Annual Charge. £ Interest 11,070,353 Annual sinking funds 7,000 Repayment of funded <febt 386 5 224 Public Debt Repayment 1,053,559 Total gross charges £12,517,136 “The last-mentioned amount, £12,500,000, represents the total gross charges payable in respect of the debt as at the 31st March last, but I would again emphasize that the greater part of it, about £6,750,000, will come from interest-earning accounts. leaving only £5,750,000 to be borne by the taxpayer as such. Of the latter amount approximately £3,750,000 is for war debt. RENEWALS AND CONVERSIONS.

“Apart from new loans and reductions affecting the total of the debt securities amounting to £5,804,736 were renewed, £307,700 debentures converted into inscribed stock, £357,000 inscribed stock converted into debentures, while other conversions amounted to £25,050. Further debentures and inscribed stock to the value of £5,383,720 were redeemed out of the proceeds of the issue of new securities of an equal face value. The last figure includes the £1,050,000 redemption Treasury bills and the redemptions on account of the matured war loan prevously referred to in this Statement. “A further reduction of £151,725 in the amount of the free-bf-income tax securities was effected during the year, leaving the amount of such securities outstanding on the 31st March, 1928, at £37,574,874. “The loans falling due in the next seven years are set out in Table No. 21 attached to this Statement. It will bo seen that nearly a third of the public debt will mature during this and the next two financial years. This year's maturities are almost wholly held in the Dominion, and I do not anticipate any difficulties in dealing with them. “The first transaction of magnitude to be faced is the 4 per cent. Consolidated Stock which matures in London in November, 1929. At the end of last year the amount outstanding was £29,490,852, but concurrently with the issue of the £5.000,000 loan for new money in May last an offer was made to holders to convert £5,000.000 of this stock into 44 per cent, stock to mature in 1947 at the rate of £lO4 10s of the new stock for £lOO of the old. This is equivalent to an issue price of approximately £95 14s for the new stock, giving a return to investors with redemption of the discount over the period of £4 16s lOd per cent. After making an allowance for expenses and redemption of the premium over the period of the new loan, the cost to the State works out at £4 18s 3d per cent., so that the cost of this por'ion of the debt has been increased by £45625 per annum, although the interest bill in the meantime is only increased by £35,125 per annum. “As the stock did not mature unfit next year, it may be said that we could have saved the increase in interest charges for one year. There would, however, have been considerable risk, in leaving the whole £29,000,000 to be dealt with at maturity, and the policy followed should result in the placing of the whole of the stock on a more favourable basis than if left to be attempted in one sum at maturity date.”