COSTLY BORROWING.

New Zealand Herald, Volume LXVII, Issue 20481, 5 February 1930, Page 10

COSTLY BORROWING.

The opinion has been expressed by Sir Harold Beauchamp that, under existing conditions, the Government could not expect to raise money in the Dominion at less than per cent.: he also remarked upon the adverse effect of "the absorption of so much money by the State." But if it is assumed that conditions dictate the rate of interest, there are still wanting a definition of the circumstances that compel the Government to issue a local loan and especially a precise statement of how much money it will absorb. According to the prospectus, the money is required for State advances, development and settlement generally. Yet. the relative accounts, according to the Treasury figures, were well supplied at December 31, a fortnight before the loan was announced. In one respect, however, there is evidence of an unusual situation. The Government has been borrowing to an unprecedented extent upon the security of Treasury bills. During the September quarter,- it issued £1,200,000 of these bills, and during the December quarter, £3,395,000. By the redemption of £1,900,000, the floating debt was reduced at December 31 to £2,695,000, yet no reference was made in the official summary of the accounts to its existence. Without elaboration of details, it may be said that the position of the ordinary revenue account, taking into account the balance at the beginning of the year, was worse to the extent of £1,095,000 than a year ago. That was almost entirely due to the fad; that in 1928 only £IOO,OOO had been transferred to the debt repayment account, whereas nearly the full charge for the year, £1,129,000, was paid this year, in connection with the November debt redemption. That prepayment does not fully explain £2,695,000 of Treasury bills. Surely there is an obligation on the Government to give its reasons, for incurring this debt, and also the terms of its issue. A statement was ,made by Mr. Forbes in the House of Representatives on November 8, in reviewing the conversion operation, that "Treasury bills in anticipation of revenue were issued in London to replenish the Consolidated Fund." This appeared to refer to a sum of only £672,000; if that is so, it can only be assumed that the balance of the £'1.595.000 of bills was issued, either in London or in New Zealand, to enable the Government to fulfil its undertaking that it would redeem £4,000.000 of debt with the cash proceeds of "local issues." At that timo the Treasury bill rate was exceptionally high, so that until they can be discharged, the Government must be paying dearly for the accommodation, whatever its source. There are two other points upon which information should be given. The Government should state whether any of the bills are held in London, and when they are due, as the remittance of any largo amount from New Zealand would again adversely affect the exchanges. Presumably £1,000,000 odd of current revenue, normally reserved this quarter for the debt repayment account, will be available to redeem Treasury bills, but the remainder must be covered by fresh borrowing. It would seem that the first charge upon the 5.\ per cent, loan will bo to pay off "£1.095,000 of Treasury bills. Beyond that, an unknown amount is required to finance new capital undertakings. There has been extraordinary secrecy regarding a phenomenal flotation of Treasury bills and extraordinary reticence regarding the new loan. It is fully time the Government took the public into its confidence.