Manawatu Evening Standard. SATURDAY, MAY 10, 1930. NEW ZEALAND’S CREDIT.

Manawatu Standard, Volume L, Issue 138, 10 May 1930, Page 8

Manawatu Evening Standard. SATURDAY, MAY 10, 1930. NEW ZEALAND’S CREDIT.

Tiie very favourable response given to the latest New Zealand loan placed on the London market demonstrates once again the confidence felt by British investors in New Zealand securities. The credit of the country still stands high on the Home market. Within three hours of the £5,500,000 loan being thrown open for subscription, the amount was over subscribed. The terms upon which the money was obtained can only be regarded as very satisfactory, considering the fluctuations in the London money market during the last few months, and the many avenues available to the British public for profitable investment. Offered at 5 per cent., wdth a discount of £1 per £IOO on the stock subscribed, Sir Joseph Ward states that the return to the investor will be £5 Is 8d per cent. The cost to the State will thus be more than that of last year’s £7,000,000 loan which was issued at £95 at per cent., and, allowing for discount and expenses, cost the country £5 0s Id per cent., the yield to investors, with redemption of the discount, being, as stated in the 1929 Budget, £4 16s 5d per cent. On the same basis the cost of the new loan is, therefore, likely to work out at a little over £5 5s per cent., which, seeing that local investors are receiving £5 10s per cent, on over the counter sales, is decidedly satisfactory. There are not wanting indications that money is not likely to be so freely obtained in New Zealand, as diming the past twelve months or so when the Government was able r.o obtain practically all the money it needed for State advances and other purposes from New Zealand investors. The first indications of stringency in the money market locally were noticeable in January, when the Government raised the interest it was paying from 5& to 5£ per cent., its action in that respect ■ giving rise to a good deal of unfavourable criticism as being likely to raise interest rates. The success of the new loan should have a steadying influence on the local market, but that success should also be tempered by the reflection that, if the Dominion is to maintain the high standard of credit it enjoys in London, there must be a tapering off of overseas borrowing especially as the moneys now borrowed are likely to be applied mainly for unprofitable railway construction works. £4,500,000, Sir Joseph Ward states, is being borrowed for “general purposes,” £500,000 for

hydro-electric power' works and £‘600,000 for railway improvement purposes. The loan involves an addition of close upon £300,000 per annum to the interest bill which has to be met in London, and care must be exercised to see that that amount is forthcoming by increased production for export, which, in view of the lower prices prevailing abroad for New Zealand-produce, may not be a very easy matter. At the 31st March, 1929, the public debt of the Dominion stood at £264,191,983. A Ministerial statement made the other day indicated that the increase in the debt last year amounted to something like three and a-half millions. With the new loan of five and a-h‘alf millions and local borrowings, the debt now cannot be far short of £275,000,000, if it is not actually in excess of that amount. Care has to be exercised to see that the country does not reach the highly unsatisfactory condition in which the Commonwealth of Australia is placed today ;vith national and State public debts of well over a thousand millions, which, per head of the population, is probably no greater than New Zealand’s per capita debt. Exports must be maintained on such a basis as to cover both imports and interest payments abroad. Australia is in the unfortunate position of having failed, during the seven years, 1922-23 to 1928-29, to balance her exports with her imports and interest payments abroad by £235,000,000, and for the first eight months of the current financial year the drift leeward has continued to such an extent that it is estimated the debit in international account will add from £75,000,000 to £80,000,000 to that amount this year. Hence the need for the drastic economies which have foi’ced upon the Federal Government and the restrictions that have been placed on the credit of the community. Excessive borrowing abroad and excessive importations are primarily responsible for the troubles and financial difficulties Australia is experiencing at the present , time.