PUBLIC DEBT

New Zealand Herald, Volume LXXIII, Issue 22489, 5 August 1936, Page 15

PUBLIC DEBT

LONG-TERM LOANS INCREASE OF £1,979,881 REDUCTION OVERSEAS POLICY OF GOVERNMENT [nv TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Tuesday The Dominion's long-term public debt increased by £1,979,881 as a result of last year's operations, bringing the debt at March 31, 19.30, to £282,561,098. These facts were disclosed by the Minister of Finance, the Hon. W. Nash, in his speech on the Budget this evening. The Minister pointed out that additional debt, amounting to £3,836,591, was actually incurred, but as an offset to this -were redemptions to the amount of £1,856,710, which brought the net increase to the figure above mentioned. The external debt had decreased, and it was the Government's policy to reduce the amount of overseas indebtedness. The redemptions previously referred to, which substantially reduced the additional debt of £3,836,591, were derived from the following sources:— Public Debt Repayment Account £1,440,215 Reparations and war credits .. 3,330 Repayments of capital by other accounts .. .. 413,165 £1,856,710 Of the debt redeemed, £187,900 was held in Australia, £1,261,615 in London and £407,195 in New Zealand. Premiums on Conversion The premiums on conversion in New Zealand, £340,575, were the result of conversion to a lower rate of interest at par of 4 per cent securities purchased by Government departments from time to time at market prices above par. No increase in debt charges was involved. The Greymouth Harbour Board debt of £260,000 was guaranteed by the State, but was taken over and became part of the public debt as the result of the passing of the Greymouth Harbour Board Amendment Act, 1935, which provided for a readjustment of the finances of the board pursuant to an agreement entered into with the Government, whereby the subsidy formerly pavable to the board ceased and the C)rown became entitled to the revenue from the special coal rate applicable to coal shipped from the port of Grey mouth. Mr. Nash said the additional debt was incurred for the following purposes:— Expenditure on public works . £2,400,000 Cost, charges and expenses of dealing with £10,135,800 of London debt last year .. 836,015 Premiums on conversions in New Zealand . . .. 340,576 Greymouth Harbour Board guaranteed debt taken over .. 260,000 £3,836,591 Concerning the item for cost, charges and expenses of the London 1935 conversion, the particulars of this operation were contained in last year's Budget, explained Mr. Nash, The conversion issue was at a discount of 1J per cent, but the largest item in these expenses was £523,270 for exchange on remitting £2,135,800 to London for redemption purposes, the amount converted in London being £8,000,000 only. The £836,000 referred to did not represent a net increase in the public debt, as approximately £1,250,000 out of the Public Debt Re'payment Account was used for redemptions. Improvement in Debt Position Mr. Nash said there were other movements in the long term public debt which were worthy of note. The debt held in London decreased by £2,260,300, and in Australia by £590,900. This meant that the external debt of the Dominion t-o bo provided for out of exports had fallen by £2,851,200. The domiciled in New Zealand increased by £4,831,081, but behind this was a decrease of £2,995,770 in the debt held by the public, and an increase of £7,826,851 in the debt held by Government departments. These movements represented a considerable improvement in the debt position as a whole. Any particular reduction in. the debt held abroad represented a lightening of the debt burden upon the Dominion. "While it involved a redistribution of income, the debt held internally involved no net burden on the Dominion as a whole, but the charges on the debt held abroad meant so much less available for the purchase of goods for consumption in New Zealand. "I may add that it is the Government's policy not only to refrain from further borrowing abroad apart from conversion operations designed to lighten the interest burden on the existing debt, but to endeavour steadily to reduce the amount of overseas indebtedness," declared Mr. Nash, who gave the information that the domicile of the total public debt of the Dominion as at March 31, 1936, was as follows: London .. .. .. £155,711,030 Australia .. .. 1,592,650 New Zealand .. .. 122,256,518 Total . . . . £282,561,098 Conversion Operations As far as conversion operations were concerned, arrangements had been made for dealing with £5,869,989 of 6 per cent stock in respect of which there was a right to repay on or after August 1. Notico was given of the Government's intention to repay on this date, and applications for conversion and cash subscriptions were invited in London for a total of £4,000,000 3 per cent stock at an issue price of £9S 10s per cent. Applications were received for conversion £1,558,000 and cash subscriptions £1,238,000, leaving £1,201,000 to bp subscribed by the underwriters. The complete success of the issue was, unfortunately, marred by the reaction from the world affairs at the time, but, allowing for this, the issue was a satisfactory one, and the Dominion was congratulated upon it by leading financial opinion in London. The return to investors over the term of tho new loan was £3 2s Id, while the cost to the Government, after allowing for the redemption of the discount on issue and other expenses, would bo £3 4s lOd per cent. The balance of the 6 per cent stock, £1,569,989, was to be redeemed from funds to be provided from New Zealand. The amount in question, together with the cost of remitting the same to London, £458,147, would be I provided to the extent of £1,690,000 from the Public Debt Repayment Account, and the balance borrowed internally. No public issue in New Zealand would bo necessary. The not result of the conversion to a lower rate of interest and the debt repaid was a saving in interest of £208,000 per annum. . RADIO CONTROL COST OF ADMINISTRATION [BY TELEGRAPH —SPECIAL REPORTER] WELLINGTON, Tuesday The administration of broadcasting for the nine months ended March 31, 1937, is estimated to cost £143,805, of which salaries will account for £27,640. The salaries range from tlio director's £.1500 a year down to one at £6 a year. Capital expenditure in the Broadcasting Account is shown at £92,200, as follows: —Titahi Bay buildings, £24,200; new 2YA transmitter, £60,000; new transmitting equipment, £5000; reconstruction and removal of old 2YA, £2000; miscellaneous technical equipment, £IOOO. Provision for payment to B stations is fixed at £IOOO.