MORE CRITICISM

New Zealand Herald, Volume LXXV, Issue 23111, 9 August 1938, Page 5

MORE CRITICISM

DOMINION FINANCE POLICY OF SPENDING EFFECT UPON CREDIT LONDON, August 7 New Zealand's credit is still the subject of criticism in London. The Investors' Chronicle says it considers that investors are faced -with a new situation as a result of the political aims of the Dominion Government. The higher expenditure is much less elastic than the national income, and the bondholders' worry is that the safety point does not depend 011 periods of prosperity but of depression. From this point of view the safety point has been already passed. New Zealand's record suggests that, if faced with a crisis, she would pay her debts and cut her social services, says the paper, but, while the problem remains, a jjeriod of low prices and panicky markets will be unavoidable. .Moreover, New Zealand's legislation regarding working hours and wage rates is affecting costs. The trade surplus is declining at present at a rate of L7.0no,0()0 per minimi, and is obviously inadequate to meet debt services and other invisible expenses. London funds have declined to about £25,000,000, which is sufficient to cover a moderate deficit for some time abend, but tlu: disquieting thing is that, unless the present tendency is changed. New Zealand will no longer have a surplus in London at all. The Dominion Government's explanation that tho trade deficit is merely temporary, and is due to imports of capital goods, does not impress investors as much as the belief that it is due to excessive domestic expenditure. The question is whether Mr. Savnge will have the courage to check the tendencies his Government has set in motion. In the meanwhile, New Zealand Stocks may go lower, tliotigh in the long run it is most improbable that New Zealand will default.

REPLY TO COMMENT STATEMENT BY MR. SAVAGE [Bl r TELEGRAPH —PRESS ASSOCIATION] "WELLINGTON, Monday " I expect one of these each week from now on until the election," said the Prime Minister, Mr. Savage, when asked to comment on tho reference in a cable'message to New Zealand's credit. " There will bo no necessity for this sort of thing after the election, because wo will bo back again, and they will give.it up for another threo years," he added.

HUME PIPE CAPITAL PROPOSALS FOR AN INCREASE Shareholders in Hume Pipe Company (Australia), Limited, at an extraordinary meeting in Melbourne this month, will be asked to carry resolutions increasing the nominal capital from £500,000 to £1,000,000, and creating 112,500 7.} per cent cumulative preference shares of £1 each. Tho purpose of the resolution is to carry out the merger with Hume Pipe (Far East), Limited. In a circular to shareholders, the directors of the Australian company state that the proposal is to purchase shares in the Far East company on the basis of three preference shares in the Australian company for every two shares in the Far East company. Already holders of 44,000 shares in the Far East company have agreed to tho proposal.

RURAL ADVANCES BONDS EXCHANGE FOR STOCK POSSIBLE The Reserve Hank of New Zealand lias notified the Stock Exchanges that Rural Advances Bonds issued by the State Advances Superintendent were .merged with the Public Debt as I mm. April ] and these securities are now charged on the Public Revenue in the same way as ordinary Government stock or debentures, l'n the circumstances it seemed desirable that the privilege of exchanging New Zealand Government debentures for New Zealand Government stock should bo extended to include Rural Advances Bonds and the Minister of Finance has given his approval accordingly. Holders of Rural Bonds may on application now exchange their bonds for an equivalent amount of stock maturing on the same date as the bonds, but bearing interest at 4 per cent per annum. Rural Bonds mature on September 10. 1947. The original rate of interest was 5 per cent, but the effective rate is now 4 per cent by the operation of the interest tax imposed under the. provisions of the Finance Act, 1932-33.