Manawatu Evening Standard. MONDAY, JULY 6, 1936. LONDON LOANS.

Manawatu Standard, Volume LVI, Issue 183, 6 July 1936, Page 6

Manawatu Evening Standard. MONDAY, JULY 6, 1936. LONDON LOANS.

London financial circles have been much perturbed over the bare announcement of the Prime Minister (lit. Hon. M. J. Savage) that the Minister of Pinnace (Hon. W. Nash), who is to visit London towards the end of the year, will, while in the great metropolis, open negotiations with the holders of New Zealand loan securities for a reduction of interest on the bonds. New Zealand stocks have fallen, and the commercial and financial writers in all the London daily papers have come out with adverse comments; but a statement issued by the Minister for Finance has considerably allayed the first feelings of apprehension that default or repudiation was intended.

At first glance it would seem to be quite a reasonable proposition to approach the creditors for a reduction of interest. Hut let us turn the searchlight on it, and it becomes quite a different matter. The mere fact that New Zealand might find it necessary to approach its creditors for a reduction of the interest debt suggests that the finances of the Dominion are in an unhealthy condition. Wlmt would a merchant think of his retail customer if the latter sought a reduction of the debt ? lie would naturally conclude that the retailer was drifting into difficulties. New Zealand is not in financial difficulties, for the State’s balance-sheet for the year ended March 31 last showed a surplus of ,£280,000. We have given the London money market a wrong impression of our financial position, but that has been fortunately rectified now. New Zealand can pay its way, and that being so, any request for a reduction of interest would boil down to a request for tire charity of the bondholders, and that would be humiliating to a self-governing State.

There was a time when Australia was in a tight corner, with her imports running ahead of her exports, and her London credits diminishing; yet Australia did not go cap in hand and seek the charity of the bondholders, as it was believed this Dominion intended doing. London investors who subscribed to our loans did so in good faith believing that during the currency of the loan they would receive the interest named in the bond without question and without hesitation, and it was a shock to them to think that a country whose credit they have always assessed at a high rate was considering a material alteration in what should be "a binding contract. Happily, however, the Finance Minister has had published in London an explanatory statement which appears in to-day’s issue. The crux of it is that the idea expressed by the Prime Minister was that when he and Mr Nash were in London the

opportunity would be taken to ascertain by discussion with the parties concerned what could be accomplished by conversion and consolidation of the public debt domiciled in London. The effect of this has been to allay the suspicions that were unfortunately created by the Prime Minister’s statement.