BORROWING IN AUSTRALIA.

New Zealand Herald, Volume LIX, Issue 18273, 14 December 1922, Page 8

BORROWING IN AUSTRALIA.

By offering its debentures in Sydney, the Auckland City Council has raised its loan of £150,000 on terms probably as favourable as could bo obtained in New Zealand. It is indeed striking that for 5i per cent, debentures with a currency of 21 years, the council has been able to obtain the same price as that at which the New Zealand Government three weeks ago offered in Sydney and Melbourne 5$ per cents, with a currency of three, five or ten years, at the option of the subscriber. No announcement has yet been made regarding the result of the Government issue, but it is interesting to observe that as recently as last week a protest was made in the Sydney press against this competition with Australian Governments for the avaifablo loan money. This complaint, which would apply equally to the City Council's issue, is hardly warranted. So long as Australia sells in New Zealand a larger quantity of goods than she buys from the Dominion, she must be prepared to invest the surplusin New Zeala.nd. The position reflects on a small scale the relation between the United States and Europe. It is certainly surprising that with debt amounting to only £639,450 maturing in Australia during the current financial year, the Government should find it necessary to borrow at so high a rate as 5h per cent, to redeem expiring Btock. The explanation may be partly the difficulty and expense of transmitting money from London, where the Government recently obtained £1,000,000 at 3 per cent.— probably for only a few months on the security of Treasury bills—and the nominal cost of the Australian issue may be reduced by savings in flotation charges. Obviously, the exchange position enters into the City Council's transaction, since the proceeds of the loan are payable in Auckland at par. This is satisfactory to the council and advantageous to its bankers, as the issue enables them to reduce by a corresponding amount the balance!? held in New Zealand to the credit of Australian exporters. There is another aspect of these transactions. If public authorities are prepared to pay per cent, for Australian money, they should at least give the same opportunity to New Zealand investors to subscribe on the same terms. When loans are raised in New Zealand the interest circulates in the country and is subject to taxation. Both these advantages are lost when the stock is sold abroad, and apart from the assistance indirectly given to commerce, there is no compensation when the terms given to the Australian investor are as high as those ruling at home. Certainly the City Council has placed a parcel of its debentures on sale at the Town Hall, but it is probable that with the aid of some publicity a substantial subscription toward the new loan might have been obtained. New Zealand must look forward to the time when it will be less dependent on overseas sources for its capital requirements, and that stage of development will be assisted if a systematic effort is made to cultivate local investments in public securities. Even if the Government considered there were not £500,000 available for the purchase of 5? 2 per cent, debentures, it might at least have given the same publicity to the issue in New Zealand as was given in Australia, so that those who sought such an investment might have had the opportunity to secure it.