THE PUBLIC DEBT

New Zealand Herald, Volume LXXI, Issue 21893, 31 August 1934, Page 10

THE PUBLIC DEBT

Comments passed, since the Budget appeared, on the debt position disclosed by it, have been based on the mistaken conclusion that during the year ended March 31, 1934, the public debt had suffered a permanent increase from £282,623,000 to £302,792,000. If these assumptions were correct, it ■would be a very serious matter. With the opportunities for profitable development work circumscribed as at present, with the population practically at a standstill, it is more important than ever it was that a tight hand should be kept on the public debt. As it happens, though the two totals, quoted do appear in the Budget, indicating an apparent increase of £20,169,000 in the debt, fortunately they do not represent a corresponding movement in the Jong-term debt, and transactions since the last financial year closed have altered the position materially. Actually the increase in the long-term debt amounted to £1,277,000, of which £491,000 represented capital increase due to conversion operations, and the rest the balance of 'pew borrowing over redemption during the year. A sum of £4,523,000 was borrowed, while debt repayment amounted to £3,737,000, making the net increase by these transactions £786,000. The further inflation in the gross debt was due to an increase of £18,892,000 of floating debt, mostly incurred in consequence of the exchange indemnity. At the beginning of the financial year the value of Treasury bills outstanding amounted to £3,965,337, of which £1,585,000 was on account of ordinary revenue transactions, and £2,380,337 in connection with exchange operations. At its close the revenue bills totalled £3,452,109, or ari increase of £1,867,109. In the same period the obligation on exchange account rose to £19,404,872, an increase of £17,024,535. Thus the rise of £18,892,000 of the floating debt was occasioned, and the £20,169,000 by which the public debt had grown at March 31 has been accounted for. Since that date, however, there has been an important change. On August 1 the greater part of the bills issued on account of the exchange indemnity were redeemed through the sale of surplus sterling to the Reserve Bank. The rest are to be repaid as they mature. Thus the sum of £19,405,000 will disappear from the floating debt, and the net increase in the public debt, assuming there are no other Treasury bill transactions, will be slightly less than £1,277,394, the amount added to the long term debt last year. The whole financial transactions of 1933-34, reviewed in the Budget, may be open to criticism, but it is a complete misapprehension to consider that they resulted in the permanent addition of over £20,000,000 to the public debt..