ENGLISH INVESTMENTS IN NEW ZEALAND.

Lyttelton Times, Volume L, Issue 5560, 17 December 1878, Page 3

ENGLISH INVESTMENTS IN NEW ZEALAND.

(AvoltoVid r<«My Kret.) We have noticed in rooant comments on Now Zealand, published by our contemporary tlio Sydney Afomray Herald, a strong antagonistic bios, which is not reconcilable with the ordinary fair opinion* of that journal oh aur other ground* than jealousy of the rapid strides and ample r source* of this Colony ** compared with (he. slower development and more doubtful utura of our neighbour. The Sydney Moni Jlrenld of Oct. 21 is now before u», and in a lending article its reader* are .treated to ft lengthened dissertation on the present position of this Colony in connection with the failure of the City of Glasgow Bank, which cannot fail to provoke n smile when read by Now Zealand colonists, and a sneer from those of them who know how .matters at present stand in Now South Wales. The article in question begins with the statement that "the connection *>f the Now Zealand Land Company with the failure of the Glasgow Bonk lias apparently been one of the onuses which led to that commercial disaster; but it would probably bo on exaggeration ot the telegram to understand that it was the principal cause.” The writer appear* to We been rather muddled at the commencement, at it is difficult to see how ft connection with » failure can be assigned os one of the causes bf the failure, but this wo pass over. We would like to ask the Herald whether it would liavo been any exaggeration of the telegr»im‘to ;have connected Now. South Wales: and with the failure of the Glasgow Bank, much more thin Now Zealand P Perhaps the Herald, is hot aware that the land company which it call* “the Now Zealand Company" was, in reality, called ’the New Zealand and Australian Land Company } and , withrtgard to their in vestment* in the respeblive colonies, wo will venture the assertion and leave it to time’ to prove its truth that while the investments in New’Zealand will realise a great deal more than cent per cent ,ou the money put into them; the loss to the company, if any. results, will bo from Its Australian investments. It js not for us, with the limited information wo.now havo as to the causes of the stoppage of (he City of Glasgow Rank, to criticise too financial, operation* of t)usr Land Company. - Probably, it will appear that the parties interested, who, we believe, faro nearly aU residenta in Glasgow, have been too greedy, and financed for their requirements too long, hoping to be able to hold on to their estate* till they could obtain the very highest prices for their lands; . We ap not know the acreage of their vast possessions in this Colony, but we do know that there is very little of it that would ngt ut.preßout sell at from £l2 to £U per ftore, and, allowing for all costof improvement, management, and mismanagement, we fed sure that none of the properties con stand in the Company’s books at more then £5 per acre. Whatever the errors of finance, therefore, there is no probability of the Company’s investments hero proving an ultimate loss, and wo may bo allowed to express a hope that the outcome of their Australian investments may prove equally fortunate. But what, in the name of common sense, has the mismanagement of such a company as this to do with the progress of this or any Colony P New South Wales has been no stranger to errors -in finance of a character much more likely to impede her progress than investment in land by foreign capitalists, and, after reading the article we luvre referred to very attentively, we detect throughout it a severe criticism of the present condition ot affairs in Now South Wales, which the writer ho* chosen to cloak under pretence of writing against New Zealand. Well may ho say “ the circumstance points a moral which wo ought not to neglect, for if locking up a certain portion of English Bank capital may, under cntiral circumstances, lead to great difficulties, it is a warning against irrtitating the mistake on this side of the world.” Wo have no doubt the point of the moral would be felt as soon as read by many of those Bankers in New South Wales j who, by late revelations, have been shown to hold about four million and a half of Government monies, and who have induced the Government, rather than produce the financial embarrassment which re-payment of any large portion of the balances would involve, to go into ,the London market and borrow more ! Had the Herald taken this as the text of its article, it could not have selected a better, and it would have had this advantage, that by doing so it would not have made a disclosure of its lamentable ignorance on New Zealand affairs.

The peculiar process which resulted in a large apparent balance to the credit of New South Wales with, its hankers may not generally be known in New Zealand j and since, as the Herald remarks, “the circumstance points a moral which we ought not to neglect,” it may be well that we shortly describe it. The liberal land law of New South Wales invited the investment of capital; the invitation was liberally responded to within the Colony, and, owing to the protective and restrictive policy of Victoria, much of the spare capital of that Colony was also sent across the border for investment in the lands of Riverina and other of the more fertile districts of New South Wales. The balance, at the Government bank got in excess of the amount which, by its agreement, it was entitled to retain in deposit, and the surplus was distributed among the other banks. Thesebanks, having no outlet for this capital in their ordinary commercial business, lent to those in search of land, who, as soon as they purchased, repaid it to the Treasury, and it again found its way to the Government bank. was redistributed among the oilier banks, and the same process continued to be repeated, till the Treasury balances swelled to the .enormous amount of four and a half millions; in other words, the banks became responsible to the Government for this largo amount, and the wherewithal to pay it was the broad acres purchased with these fictitious balances. The day of reckoning came. The Government required the money, but on the first indication of a disposition to withdraw it, it was shown that though the balances existed on paper, it was simply impossible for the bank to find the money, and the Government, warned that any attempt to enforce payment must result in a financial crisis, resolved, despite the fact of having such enormous credit balances, to resort to the London money market for a new loan. Substituting the name of Now South Wales for that of New Zealand in the article on which we comment, nothing could be more applicable than the strictures of the Sydney Morning Herald, for it would then read, “ New South Woles for the past few years has been the theatre for a groat deal of speculation “ a policy intended to precipitate the Colony at once into a condition of prosperity.” “ But it was impossible for the Government to conduct a grand speculation of tills sort and yet keep the speculative spirit all to itself;” “so much money gave a great stimulus to speculation inland.” “ This process is legitimate enough, provided that those who so invest have really the capital to spare, and can afford to wait till the return comes; but the ease is different when those who invest are simply speculators using other people’s money, on which, they, must pay an ' interest while waiting for their own profits 5 and the cose is still worse when the money so borrowed is bank capital. It is an axiom amongst prudent bankers that the money they employ should never be committed to long engagements j bank capital should be in constant movement and circulation.” “If a bank lends” “a large proportion of its capital,” “and that capital is invested speculatively in land in the hope of a rise, it is obvious that the money cannot bo quickly reclaimed if the bank should require it for more legitimate purposes, nor even if it should need it to save itself from ruin.”

Wo hare no doubt the incubus of this financial embarrass-noiit was heavy on tho mind of the writer of tho articio in question, and that it was by a morn perversion of facts that ho attempted to fasten them on Now Zealand, instead of Lis applying them nearer homo. But wo may onligliten the Sydney Morning Herald on this important difference in tho condition of the two Colonies, that, ns far as wo have been able to ascertain, any speculation in land which Ims prevailed in New Zealand is supported, not by tho capital of its local banks, but chiefly by that afforded by institutions the spocml province of which is to lend on landed ecounties, and which do not look for such a speedy return of the capital so invested as tho Herald very properly thinks a bank ought to provide for. It is very true, as the Herald remarks in concluding tho article wo have commented on, that “ it takes more knowledge of Colonial affairs than English people generally have to distinguish between one Colony and another/ and, as Captain Cuttle would say, “ tho merit of this observation lies in the application of it."

Wo would advise tho writer in tho Sydney Morning Herald to pay more attention to tho statistics of New Zealand before again favour-

e^, m 6n y oomthohta Itpdtt the Th ° Pjr aero of mir cultivated land* warrant* the pries* being paid for them, itnd »f Now South Wales were blcisod with f u ™ “ climate os wo, - enjoy there might bo bettor justification than now exists tot the oxccMivo investments in land in that arid Colony.