CREDIT IN LONDON

New Zealand Herald, Volume LXXV, Issue 23111, 9 August 1938, Page 8

CREDIT IN LONDON

The latest London comment on New Zealand's finances, published this morning, is less a criticism than an estimate of the investor's attitude toward the facts as they aie known. When the Budget appeared, it was favourably received, commentators being impressed by the orthodoxy Mr. Nash observed in basing his plans on a small favourable balance at the end of the year. If, however, this latest view of the market's reaction to New Zealand policy is accurate, investors are regarding other factors than a Budget balanced from year to year. Two points are selected as the foci of their disquiet. The first is a rate of expenditure based, in effect, on boom conditions, and likely to prove intractable in case of a recession from those conditions. Experience proves the soundness of this view. Not only in New Zealand, but in the United Kingdom itself, in Australia, and in the United States, the task of reducing high levels of public expenditure proved • the severest task Treasuries had to face in the troubled times following the break of 1929. New Zealand is now spending the inflated revenues derived by emergency taxation levied on normal, or more than normal, revenue. If the need to shorten sail becomes imperative, the task of doing it will not be easy. The second point is the low trade balance and the admitted recourse to London reserves for necessary credits. If continued, this would be dangerous, but there are already signs of the situation correcting itself by a fall in imports. So far as is known, New Zealand will make no application to the London market until 1939-40, when some £17,000,000 of debt matures. By that time the trade position may have recovered sufficiently to have reassured the investing public.