THE H.B. TRIBUNE WEDNESDAY, JANUARY 23. 1929 A SIGNIFICANT FAILURE

Hawke's Bay Tribune, Volume XIX, Issue 31, 23 January 1929, Page 6

THE H.B. TRIBUNE WEDNESDAY, JANUARY 23. 1929 A SIGNIFICANT FAILURE

JF anything more was needed to emphasise the value of the high reputation that has been built up for New Zealand on the London money market, it is to be found in the almost complete failure of the public to subscribe to the Commonwealth loan offered there last week. One of yesterday’s messages told us that this lyid met with such a cold reception by British investors that the under writers guaranteeing its flotation were left to take up no less than 87 per cent, of the stock bearing a March date and 84 per cent, of the stock bearing a July date. This would mean that at the best the public subscribed for not very much more than one of the eight millions wanted. Not only this, but early dealings in the stock were at a marked discount on the issue price. London comment on this loan has not been very con sistent. When news of its presentment was sent us last week it was added that the loan had been favourably received on the Stock Exkange, thus suggesting that the terms submitted were regarded there as being satisfactory from a lender’s point of view. Now that it has so signallj’ failed, we have the financial press saying that the public response "was no worse than had been feared owing to the priv- of issue." T n the face i \e idit’* .** “ r jrq f fjGF 1

reached us—face interest 5 per cent, issue price £9B, maturity 1945-75 (?) —this latter explanation is difficult to understand, for they mean an over-all return to the lenders at least 5/- or 6/- per cent, better than that on the seven million New Zealand loan successfully floated only a week or twoearlier.

There is, of course, just the bare possibility that the original figures as cabled to us got mutilated in transmission, though that does not appear at all likely. But, leaving this aside for the moment, it will have been noted that there is no uncertainty whatever about the adverse criticism thai is passed upon Australia as an over-frequent borrower in London and on the causes of the relatively low estimation which she is apparently held by the investing public. This last experience of the underwriters is by no means unique so far as Aus tralia is concerned, as they have found themselves landed with pretty nearly as heavy responsibilities in connection with almost all the Commonwealth’s more recent loans* No doubt in the present ca.se the unfavourable report of the British Economic Com mission upon conditions in Australia will have had something to do with the chill welcome extended to her Loan. And here it is just as well for us to note again that one of that body’s most serious points of condemnation was directed to imprudent expenditure upon, the construction of railway livie that had all along proved unable to earn interest on the cost of building them and were therefore a heavy burden on the revenue .contributed by the long-suffering taxpayers, Fortunately, or perhaps rather, in the end, unfortunately, we have had no British commission here to point out the errors of our ways. Had this been the case, and had they dealt with us as frankly on this score, and more particularly on railway construction now in contemplation, as they have done with our neighbours, we might not continue in such good odour in London as in the recent past. The lesson to be learned from Australia’s unhappy experience is rendered all the more impressive when we note, as probably very few have done, that although our seven million loan floated in London this month was over sub scribed, it was only by a very nairow margin. A brief message received last week) stated that “small subscribers had been allotted the full amount applied for, and that big subscribers had received 86 per cent.” It will thus be seen that the surplus of the aggregate body of subscriptions was very small indeed. This contrasts somewhat ominously with the six-fold subscription that greeted Mr. Downie Stuart’s five million loan last May. There may be outside factors that help to account for this apparent fall in the temperature of the response to our calls. But we have to remembei that Sir Joseph Ward himself, then only just back from the Old Coun try and claiming an eminent financier as his authority, told us that there were hundreds of millions there awaiting the offer of investments from abroad. Keeping this in mind, it might be just as well for him and his colleagues and confiding followers to put on their considering caps and bethink them whether his ill-considered an nouncements of intended reckless expenditure on railway construe tion may not have had something to do with the seeming fall in New Zealand credit. He, by the way, has not had ahything to say publicly with regard to the very narrow margin by which his loan was floated. One may be allowed to wonder whether he now feels as sure as he said he was about arranging during this year for sixty millions of money that he will be able to lend out at per cent, “without costing the taxpayers a penny.”