EXCHANGE POOL PLAN.

New Zealand Herald, Volume LXVII, Issue 20628, 29 July 1930, Page 7

EXCHANGE POOL PLAN.

AUSTRALIAN PROVISION.

EFFECT ON OVERSEAS TRADE. PRICES FOR BONDS WEAKER. [FROM our own correspondent.] MELBOURNE, July 20. Although tlie voluntary agreement of 1110 associated banks to mobilise their London credits so that the Government, may have first, call upon their overseas resources to meet national obligations as they become due has met with general commendation, such action has disclosed to the Australian public the gravity of tho economic situation, with the result that there has been a sustained pressure to sell Stock Exchange securities during the past week. Public buying is of limited extent and. accordingly, it is not surprising to witness a further marking down of values. From a Commonwealth bond point of view, the position is somewhat paradoxical. For instance, the new loan is meet-

ing with very encouraging support, and its entire success is assured. However,.

this encouraging factor is by no means reflected in the market for existing Commonwealth loans. With the exception of a few issues, prices have been marked down almost daily, notably per ceut. 1933's having receded almost 37s 6d per cent, during the past fortnight. Tho average return, excluding the 6 per cent. 1930 and 5 per cent. 1943 issues, has reached a peak level for recent years, figuring at £6 5s 9d per cent. This is largely due to the fact that abnormally high returns are available from shortdated issues, especially the SJ,- per cent. 19315, which yield upwards of 6 7-8 per cent, and the 5j- per cent. 1933'5, which give a return of 62 per cent. While financial opinion in London appears to be gradually veering in Australia's favour, tho recent uplift in tho quotations of tho Commonwealth's securities overseas has not been fully maintained, the 5 per cent. 1945-75 loan selling back from £9l to £B9 ss. This movement has occurred in spite of tho

continuous easing in London money rates. For instance, the flotation of tho recent South African loan was particularly successful. This loan carried interest, at the rato of 5 per cent, and had a currency of 1950-70, the issue price being 93 per cent. The issue was so much oversubscribed that applicants received allotment of only 15 per cent, of tlicir requirements and, further, the opening quotation for the loan was made at 1 per cent, higher than the issue price. The credit of Xew Zealand and South Africa appeai-s to be much the same in London at the present juncture. With regard to trade and commerce there is no doubt, the business community is now feeling the effects of the current depression and almost every successive balance-sheet issued discloses a decline .n profits. Much industrial progress has also been retarded as it is not known in what manner the further restriction of overseas credits will work when the mobilisation scheme is completed and in operation.: Sir Otto Niemeyer's natural silence, as yet, regarding the remedial measures that will have to be adopted to enable Australia to face her financial difficulties squarely is also another detrimental factor, virile the increase in taxation and the ramification of the proposed sales tax have had very disconcerting influences on business generally.