DOMINION LOANS

New Zealand Herald, Volume LXXIII, Issue 22463, 6 July 1936, Page 10

DOMINION LOANS

INTEREST QUESTION LONDON CRITICISMS CITY CIRCLES PERTURBED THE EXCHANGE FACTOR By Tolepraph—Fre.ss Association —Copyright (Received July f>, r>.r> p.m.) LONDON, July 1 Mr. Neville Chamberlain's statement about the Budget, deficit was made too late to influence the giltedged market, which was indirectly affected by the tactics of the New Zealand Prime Minister, Mr. Savage, whose latest retorts to criticism in the Financial Press have raised uneasy memories of Mr. Lang.

Many City men are so touchy on the subject of the sanctity of contractual obligations that any suggestion that contracts should be varied

always raises a storm of criticism

New 'Zealand's excellent standing and record, however, ensure that the Minister of Finance, Mr. Nash, will be sympathetically received provided that he makes no attempt to force conversion upon bondholders. Tlio Economist says the increased cost of New Zealand's debt service is largely due to the deliberate depreciation of exchange. Both parties entered upon the loan contract 011 money terms and a revision in favour of the debtor presupposes the right to similar revision in favour of the creditors if the value of interest and principal in terms of commodities fell.

The Financial News says it hopes Mr. Savage will - not risk the closure of the London market against New Zealand for the sake of a small saving of debt

MINISTER OF FINANCE REPUDIATION DENIED EXPLANATION. OF POSITION [BY TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Sunday The full text of the statement by the Minister of Finance, the Hon. W. Nash, which was cabled to London and released through the High Commissioner's office, denying that default or repudiation was contemplated by New Zealand in regard to overseas loans, was made public to-day by Mr. Nash. "The reference by the Prime Minister concerning New Zealand's public debt domiciled in London," Mr. Nash's statement says, "was to the Government's election policy, which stated that the British authorities would be asked to consider a readjustment on account of the increase in the burden of debt arising out of the fall in the British price-level in recent .years. In some cases it has been inferred from the Prime Minister's statement that the Dominion is experiencing difficulty in meeting its obligations in London. "This is entirely wrong, and an examination of the financial position of the Dominion will show that such an inference is unwarranted. "For instance, during the last financial year the national Budget was balanced with a surplus of £280,000, and the revenues were and still are buoyant. The latest figures, expressed in New Zealand currency, show that exports for the 12 months ended May 31 last amounted to £52,666,000, an increase of £9,646,000 over the previous year, providing a surplus over imports of £14,284,000.

"The sterling balances held by the P.eserve Bank of New Zealand and by the trading banks on account of New Zealand business amounted in New Zealand currency to £40,439,000 at the end of May, while the interest on the public debt payable in London at present amounts to £7,150,000 annually. "Recently a prominent British economist described New Zealand's banking position as one of ludicrous liquidity, the Reserve Bank's reserves being equal to 96 per cent of its notes and other demand liabilities.

"There is no question of the Dominion's ability to meet its obligations," Mr. Nash's statement continues, "and, as the Prime Minister emphasised in his statement, nothing in the nature of either defanlt or repudiation is Contemplated. New Zealand has lived, and always will live, up to its commitments.

"The idea expressed by the Prime Alinister was that when we are in London the opportunity will be taken to ascertain; by discussion with the parties concerned what can be accomplished by conversion and consolidation of the public debt domiciled in Londpn."

MR. NASH'S STATEMENT WELCOME IN LONDON STOCKS BECOME STEADIER Times Cable LONDON, July 3 New Zealand stocks are steadier, but according to the City editor of the Times, the disturbing effects of Mr. Savage's statements have not yet disappeared. Accordingly the City welcomed Mr. Nash's statement, through Sir James Parr, denying that default or repudiation was contemplated and explaining that Mr.' Savage had expressed the idea that while he and Mr. Nash were in London, opportunity might ho taken to ascertain by discussion what could be accomplished by conversion and consolidation of tho public debt. The statement also explains New Zealand's sound financial position. The Times adds: The statement should go a long way to restore the confidence of a great number of investors, who have always shown a desire to invest in New Zealand stocks, which tho Dominion must maintain in order to convert on the most favourable terms. Such operations, however, must bo governed by the terms of the various issues. It is possible that Mi\ Nash will find that some considerations surrounding the question of modifying existing contracts arc not yet fully realised.

The Daily Telegraph's City editor says he hopes the unfortunate and untimely incident will soon bo closed as a call is due on July 31 on the New Zetland loan advantageously floated 011 April 30. It is hoped that the affair will now be relegated to the well-populated limbo of political indiscretions. The Daily Mail says it hopes that nothing further will be done to impair New Zealand's credit.