AUSTRALIAN FINANCE.

New Zealand Herald, Volume LXVII, Issue 20605, 2 July 1930, Page 13

AUSTRALIAN FINANCE.

MEETING OVERSEAS DEBTS. ENGLISH BANKER'S VISIT. POSSIBLE EFFECTS OF ADVICE! [from our own correspondent.] MELBOURNE, June 25. The most important event in financial circles during tho past week has been the announcement by the Prime Minister that following consultations with tho Commonwealth's financial adviser, Air. J. R. Collins. and the Commonwealth Bank, it was decided to invito Sir Otto Niemeyer, a director of the Bank of England, to Australia in order that ho might investigate and if possible unravel Australia's present financial difficulties.

It would appear that tho main purpose of Sir Otto's visit is to see whether some arrangement can bo completed for tho continuance of prompt payment of Australia's overseas liabilities. Possibly if Sir Otto is confident that Australia has sufficient security internally he may, at some later date, recommend that the Bank of England would temporarily meet her financial obligations overseas as against local credits, and, possibly, also tho gold held internally may bo ear-marked for this purpose and thus obviate its total disposal and effect a saving on the shipping charges, insurance, etc. Recommendations Almost Mandatory. At all events Australia's securities in London are in slightly better favour and it would appear that conservative financial London has expressed approval of this move. Should Sir Otto's recommendations, when made, not be carried into effect into their entirety, well informed financiers will not conjecturo what will be tho effect on Australia's credit as much as overseas. American investors have, however, adopted quite a different attitude, as Australian Government securities listed in New York have fallen as much as points during the past week. The recent drastic break in American securities may have been a further contributing factor, but wlien it is recollected that Australian securities held during the unparalleled break in November, the major reason for the recent decline appears to bo connected with Sir Otto's mission to Australia.

The Commonwealth Treasury has had an encouraging initial response to the new Commonwealth loan. During the first fivo days the loan was opened £674,610 was subscribed, which rate of subscription is much higher than was the case during the first week that applications were received for tho March cash and conversion loan. However, the circumstances differ somewhat as between £2,000,000 to £3,000,000 was paid in interest by the Federal Treasurer during tho middle of this month and doubtless a moderate proportion of such payments has been reinvested in the new loan. Accordingly tho above figures are not necessarily a true reflex of the rate of subscriptions that may bo anticipated. An effective comparison should be available in tho course of the next two or three weeks. Selling Pressure Continued.

The market for existing Commonwealth bonds is very depressed and turnover is limited. The average interest return availablo over the whole market, has now increased to £6 Is 9d, as against £5 19s srl per cent, last week. The tone of the market appears to be still downward but the peak levels of interest rates this year have not yet been reached, as at tho beginning of March the average return over the whole market was as high as £6 4s 2d per cent. Many companies and institutions have had to liquidate portion of their loan holdings to permit of payment of income tax, etc., with the result that a large aggregate number of sellers, although not. desirous of disposing of many thousands of pounds worth, have had the effect of creating a definite competition among sellers. Government finance is still the bugbear of the situation and it is now common knowledge that the Commonwealth and States will show large deficits aggregating approximately £9,000,000. Uncertainty regarding the methods to be adopted to balance the various Governments' budgets next year is creating a very unhealthy tone in local financial circles.

Tho Metropolitan Gas Company has announced a new debenture issue for £150,000. Tho rate of interest is 6£ per cent.; the prico of issue par and tho currency eleven years. Messrs. J. B. Were and Sons, sharebrokers, of Melbourne, have underwritten tho whole of the issue.