IS IT SOUND?

Nelson Evening Mail, Volume LXI, 9 October 1926, Page 7

IS IT SOUND?

AUSTRALIAN FINANCE LOAN METHODS CRITICISED REPLY TO BE MADE (By Electrio Telegraph-Copy right) (Australian & N.Z. Cable Association.! LONDON.. Oct. 7. Messrs Svdnev Russell Cooke (stocklooker) ami- V,.' 11. Davenport have issued a- pamphlet, 'Dedicated to the Imperial Conference, 1926." entitled "Australian Finance, ' in which they strongly criticise Australia's loan methods and the expenditure oi loan money. They ask. is the system safe and are the'trustees justified in continuing lo hand over a large proportion of the nation's savings lo such reticent and pertinacious borrowers? In Tact, is Australian finance sound'' They U'ive instances of losses in connection with the Commonwealth oil refineries and th<- shipping line, and add thai it is clear that a part of the loans raised in London is sometimes applied lo purposes productive only of losses to the States and sometimes io purposes damaging to commercial linns, in which the British investor is directly interested. The Stales have hitherto failed to make proper provision for the redemption nl' their debts, says the pamphlet, and it is clear that apart from (he war debt, Australia as a whole has not made anv serious attempt lo reduce her heavy indebtedness to Britain. It is often im agined thai- the Colonial Slock Ari, 1900, carries some protect ion for investors, and that all colonial prospectuses are examined by Treasury officials, who. assure themselves of the necessity of the loan and the security behind il. As n matter of fact, no such examination is made. Maybe it would be difficult, lo alter the law," but it should not be difficult for public opinion in Ibis country lo compel the Australian Governments lo satisfy an accepted code of financial ethics when thev borrow money in London.

It, is generally claimed that the increase in Australian borrowing is due chiefly to the war. Il is Irue thai Australia's net debt during the war period increased by 100 per cent., nevertheless, it. has increased by 43 per cent, since 1918. The writers" declare that Australia's total net debt, in 1925 was equivalent to £164 per capita as compared with Canada's JCGO. The pamphlet asserts that Australian Government and municipal property in 1921 was Valued at £056.000,000. whereas the net debt was £828.000.000. Australian prospectuses should give full particulars of the condition of Ihe borrowers' finances and make proper provision for a sinking fund by means of drawings or purchases, and give schedules of items on which (he money will be spent. 'Until these reforms are carried out it "is doubtful if trustees are justified in regarding Australian loans as secure investments for the funds they an; required 1.0 administer. Sir Joseph Cook, Australian High Commissioner, said I hat the pamphlet was full of inaccuracies, and steps will bo taken lo effectively reply to it. This is one of the many writings of a most mischievous kind which is now being broadcasted on the eve of the Imperial Conference, and show the most execrable spirit. Luckily, there is a complete reply to all the' statements. A detailed reply is expected to be issued next week, after Sir Joseph Cook has consulted with Mr Stanley Bruce, Prime Minister of Australia. LOANS MATURING IN 1927 A BIG TOTAL LONDON, Oct. 8. The "Morning Post's" linancial editor says that, apart, from the Cooke, and Davenport, pamphlet the monthly report of a leading firm of London stock brokers sets nut in detail Australian loans maturing in 1927 totalling £118,000,000, of which £27,000,000 is held in London. The report goes on lo suggest, thai "if discrimination is lo be exercised in overseas loans as an effect of the coal stoppage it is clear Australian loans for new works should be withheld. A Hood of Australian Joans in 1927 for conversion purposes can hardly be avoided, but they should be accompanied by full information and provision of a sinking hind, thus helping io prevent overborrowing and unsound borrowing." The "Morning Post" adds: "Trustee privilege makes it specially important, that Australian States should not expose themselves to the risk of spoiling their welcome in London."