FINANCE MINISTER MAKES PUBLIC LOAN PROPOSALS

Manawatu Times, Volume LIV, Issue 6809, 12 January 1929, Page 10

FINANCE MINISTER MAKES PUBLIC LOAN PROPOSALS

New Issue Oversubscribed Prosperous Times ore Ahead of New Zealand Per Press Association..WELLINGTON Last Night. In the coui'se of a statement to-day in regard to the New Zealand loan, the cash portion of which (£7,000,000) is reported by cablegram to have been fully subscribed, the Prime Minister (the Right Hon. Sir Joseph Ward) explains that the money is to be spent in fulfilment of his Public. Works and hydro-electric development promises. In order to do so he has had to increase by £2,000,000 the £5,000,000 which he found the Reform Government had proposed to raise, and at the same time he decided to increase from £10,000,000 to £12,000,000 the proposed amount of loan conversions. Sir Joseph remarks that the terms of the loan are better than those of the previous New Zealand loan which broke down the 5 per cent, interest rate, and he also refers to the country’s high credit in London.

Released from Silence,

have operated adversely, the transaction is comparatively better than the previous loan, which broke the 5 per cent, rate obtaining in London for somo years previously, and it is reasonable to claim that the country’s high credit has again merited the confidence of the London market, particularly as the £7,000,000 cash issue has been fully subscribed. That the loan has had a good effect throughout New Zealand is beyond all question, as the communications to me yesterday enthusiastically acelaiim. As typical of them, I may add that one large firm said: ‘Have cabled London doubling our orders. We feel that there are prosperous times ahead of New Zealand. ” Uninformed Criticism.

Sir Joseph Ward said that until this Biorning he had not been in a position to make any public statement regarding the floating of the loan. Those who were familiar with the procedure of raising loans in England were fully aware that the Minister of Einanco in this country, or in any other country that was negotiating the underwriting of a loan in England, could not publicly discuss any details whatever until those who had underwritten the loan had had the fullest opportunity of obtaining subscriptions from investors in London. He had only this morning received by cable the release which the responsibilities of his position required before he did anything here that could easily prejudice, and in all probability greatly hamper the disppsal by the underwriters of the £7,000,000 and the big responsibility that they had undertaken. “I was in the same position during the recent sitting of Parliament,” said Sir Joseph, “ and it was to me a source of intense surprise that Rny member of Parliament, when I indicated that I could not give details on various points, should deliver speeches and press for information that only a full sense of my responsibilities stopped me from giving. Previous Loan Proposals.

Sir Joseph said he had no comment to make about one or two of the Press criticisms. It had been quite apparent for years that there were some people who put politics before everything and would apparently be delighted to sec a breakdown in great financial operations that directly affected, and if successful benefited, every class of people in the country, quite irrespective of their politics. What one did marvel at, he added, was the utter lack of judgment and discernment shown by somo who professed to lead or guide public opinion, and their obvious want of knowledge in taking * fair view of anythng, especially if it emanated from a political opponent. “I took an opportunity in December,” he said, “of advising the London Press and the High Commissioner that tho incorrect rumours about the proposal applying to the raising of £70,000,000 in one year wero quite untrue. As a proof that I anticipated any such rumours I cabled on December 20 to the London Press a statement of my proposals. As a result the following is a quotation cabled to me from the ‘Evening Standard,’ dated December 20, one of London’s leading journals which published the statement of its own accord —and that is the best answer to erroneous rumours that were circulated at tho time: —

“I may now say that when I took office on December 13, I became aware of the whole position. I was quite aware before taking office of the whole of the maturities that had to be provided for by way of conversion; I had no knowledge whatever of what the proposals of the Minister of Finance (my immediate predecessor) -were, but I found that he had held over his final decision. The proposals that had been made were fora cash loan of £5,000,000 and conversion of £10,000,000 of the 1929 maturities, to be made in the present month. The cash issue, i:e. the £5,000,000, was to cover requirements up to 31st March, 1930. That arrangement meant, therefore, no borrowing in London during the financial year 19291930.

“I camo to the conclusion after mature consideration.” said Sir Joseph “reluctantly but definitely, that those proposals would not meet the requirements of the country, and I had, as the responsibility of financing the country then rested upon me, to make up my mind whether to make a material alteration in the proposals. This I finally decided to do—that was, lo increase the amount of cash to £7.000,000 and the amount for conversion to £12.000,000. As I came into office pledged to at once put in hand four important railway lines and provide for State advances as well ns carry on other works, the proposition I found existing obviously gave, me some concern, in view of the policy X had promised the country, and I had to reconsider my plans as far as immediate action was concerned in order to assure the milway extension proposals and the State Advances to Settlers. T decided to increase the loan from £5,000,000 to £7,000,000 for public works, including railway construction and improvements, and hydro-electric schemes. “I may add that I had tentatively arranged, if required, to obtain an additional £2,000,000 locally, to ensure that all proposals that I had publicly laid down in the policy as submitted to the country would be provided for. State of Money Market.

“ ‘lt may be mentioned that it is now accepted by the London 1 market that Sir Joseph Ward, the new Prime Minister of New Zealand, fully realised the importance to maintain New _ Zealand credit here, and that he will do nothing which will weaken the high esteem in which that Dominion’s securities are held by British investors,’

“The successful result of theso very important and large transactions indicates clearly that after my proposals received the scrutiny of tho highest London financial authorities, who arc the greatest financial critics in the world, one need not feel in the least perturbed by somo of the party statements that were promulgated here.’’

“Among many matters that outsiders and the whole of my critics knew little or nothing of,” continued tho Prime Minister, “was the important consideration affecting London borrowing in the coming year, the large Imperial War Loan conversion of about £2,000,000,000 to be dealt with, ns well as the uncertain effect on Loudon finance of the changing conditions of the American 1 market, which in recent times, as anyone who takes an interest in matters of the kind knows, are very unusual both in tho magnitude and variation, and are a great factor nowadays in directly and indirectly affecting London at various times. “The new 44 per cent, cash loan of £7,000*000 maturing in 1948-1958 is being issued at £95, which will return investors about £4 16/4. per cent, allowing for the redemption of the discount on issue over the period of 29 years, at compared with £4 .1 D/S in the c isc of the last 4) per cent, loan of £5,000,000 issued in May last at £94 10/-, maturing in 1947.' Tho £12,000,000 conversion now offered is at £lO4 5/- for every £IOO of the olr stock, giving investors a return of approximately £4 15/3 per cent, allowing for the redemption of the premium over the period, compared with £4 16/10 in the case of the £5,000,000 conversion in May last, when £lO4 10/- of the new 44 per cent stock was offered for every £IOO of tho old 44 per cent stock. “It will be seen, therefore, that notwithstanding many factors that may