NEW ZEALAND LOANS.

New Zealand Herald, Volume L, Issue 15251, 14 March 1913, Page 9

NEW ZEALAND LOANS.

FLOTATIONS COMPARED. STATEMENT BY MR. A. M. T MYERS. • . . A HOPEFUL FEELING IN BRITAIN —— T The statements made by the Prime Minis- ™ ter in his policy speech at Christchurch, t4 in which he compared the three loans tl floated by New Zealand—the £5,000,000 vi loan of the Ward Government, the ~ £4,500,000 loan of the Mackenzie Govern- g ment, and the recent loan of £3,000,000 a raised by the Minister for Finance (the U Hon. James Allen) in London—have been t( the cause of a great- deal of comment. An interesting statement was given to a Herald representative yesterday on loan tl matters generally, and particularly about a the £4,500,000 loan of the Mackenzie Gov- * eminent, by Mr.,A. M. Myers, MP., who p was Mr. Thomas Mackenzie's Finance f, Minister. "Apparently," said Mr. Myers, " the Prime Minister is endeavouring to make political capital by comparing the flotation of recent New Zealand loans. Personally I have always" considered that matters of finance should, like matters of , defence, be kept clear of party politics j. altogether. So far as the flotation of the t Mackenzie loan of £4,500,000 is concerned, I let me say in my opinion that there is no J justification for a comparison of this nature being made, owing to the special circumstances operating in June last. When I assumed office as Minister for Finance at the end of March, 1912, I found that temporary arrangements had been made to i carry on' the public works and land t settlement policy of the Government, and -J also to meet maturing loans. Money had r to be obtained either by continuing these c temporary arrangements^—which in my '] opinion was not advisable by floating a loan. , , Mr. Allen's Position. ' "When Mr._Allen assumed office in July, 1912," Mt. Myers went on, "he found himself in possession of the sum of £1,658,500 available for current expendi- * ture, thanks to the flotation of this £4,500,000 loan. He was also able to \ transfer from the Consolidated Fund, as a ' result of the Liberal Government's ad- ; ministration during the previous financial - year, the sum of »750,0U0. In the third place, he had no loans falling due in London during the financial year 1912-1913, < with the exception of a small sum of £30,000, all other loans maturing there having been renewed before his accession : to office. Mr. Allen could therefore afford ; to wait, and rightly decided to delay until the beginning of the year—a period of seven months—before going on to the market for the loan of £3,000,000, when the money market was more favourable. The Short-Dated Loan. "The main objection to the £4,500,000 loan was, of course, its short date of two years,"said Mr. Myers, " but Mr. Massey knows that in matters of this kind the Minister for Finance in Wellington must be guided by . the financial advisers of the Government in London. Naturally, it' is better finance to float a long-dated stock loan if this can be arranged on satist factory terms, but when the Government s '. financial advisers stated that it was impossible at that particular time to issue ; a long-dated loan on anything like favourable terms, it appeared to me that it was not advantageous to commit the country to a high rate of interest for 20 or 30 years. The London Times recorded its opinion at, the time- that the course adopted by New Zealand was probably the L best way out of a difficult position and I L" may point out that when I pressed Mr. ► Allen, in the House last August, to state • what course he would have adopted, now • that he had all the papers before him, 1 he had to admit that under ' the circum--1 stances probably he would have done very ' much what I did." ..- ' , Prime Minister's Figures Questioned. [ "But was not the cost of this loan . fairly high V Mr. Myers was asked. . t " The statement was made by the Prime . Minister," replied Mr. Myers, "that the J coat of the £4,500,000 was £5 2s 9d per » cent. I should like to say, that the figures supplied to me by the Treasury , Department at the time the loan was , floated showed that the interest would j work out at £3 12s per cent. The underi writers' charges, brokers' commissions, etc., amounted to £1 15s per cent., and f to this sum has to be added the sum of £1 per cent, for discount, the loan being placed on the market at £99. To meet this additional cost of £2 15s per cent. for the two years, a sum of £1 6s 9Jd per cent, has to be set aside each year, making the annual rate of the loan £4 18s 9id. When the loan matures, however, there is every chance that the market will be more favourableit cannot be much • worse—and there is no reason why the a loan should not be converted into a 3£ or 1 3| per cent, stock loan m for 30 years, in 1 which , case the total cost of the loan J will ultimately work out at considerably t less than the recent loan of _ £3,000,000, s even allowing for double flotation expenses » at the end of the two years. I had this J alternative in my mind when negotiations 6 were proceeding, and in view of the ab- . normal and world-wide stringency which - prevailed, I: considered it better that such a adverse circumstances should be allowed - to operate against us for a short period f only, Such as two years. ) An Easing of the Market. * " The Prime Minister considers that the ? money market is even more stringent now 1 than at .the time when the £4,500,000 ". loan ,was ! floated, bub I cannot agree with 1 him. Apart from the fact that last June, 8 China was endeavouring to borrow: 8 £60,000,000, Canada was also on the r market seeking £50,000,000, and other 6 countries were asking large sums, to say ? nothing of the adverse influences of the i Italo-Turkish-war." a t A Timely Improvement. $ a " What is your opinion of Mr. Allen's ~ recent flotation?" asked the interviewer. 6 "I consider that the Minister for Finance |; is to be congratulated on the terms he has £ secured, said Mr. Myers, " but since Mr. i. Massey has made comparisons, I would [. point out that some six or seven weeks 1 before this loan was floated, New South r Wales raised a long-dated loan (repayable ~ in 1942-62) of the same amount, and l practically on the came terms at 4 J»er „ cent, at 994, as against New Zealand's i. •4 ' per cent, at 98; while even more ren cently Tasmania succeeded in floating a i long-dated loan of £1,300,000 _at 4 per .. cent, at 99. As it was impossible to ob- " tain terms such as these last June, owing ! to the financial stringency, there is no Z doubt that there is an improvement in,the market—an improvement which there is every reason to hope is more than temporary. Financial authorities in London say that there is an exceedingly hopeful feeling in the Old Country; credit is sound, and the accumulation of capital is immense. Government securities will be among the first to rise, and although it is true that the yield on these ie not very '• tempting at the moment, it cannot be * doubted that there will be a decided re's rwirftrv."