EDITORIALS.

New Zealand Mail, Issue 871, 9 November 1888, Page 28

EDITORIALS.

Consolidation.

In concluding our comments last week on the proposal for the consolidation of the Wellington City Loans, we remarked that there was enough information to be gathered from recent English financial papers as to the preference exhibited, by investors, for consolidated municipal loans having a long and settled currency, to warrant the expectation that the proposed operation would be feasible if judiciously timed and skilfully conducted. And we suggested that not only was the experiment well worth trying, but also it might be desirable and practicable to try it on a largely extended scale. The ceneral idea which we propounded was - the consolidation of all the New Zealand municipal loans under a single scheme and their conversion into a uniform long-dated stock bearing a low rate of interest —say 4 or 31 per cent, the latter being the rate favoured by Mr Westgarth, who is a distinguished authority on the subject. We hope that this suggestion will be taken into serious consideration for we believe the plan is entirely feasible if set about in the right way, and there can be no doubt at all as to the advantage which the Colony in general and the various municipalities in particular would derive from such a consolidation. To give some idea of the extent to which the ratepayers of the various New Zealand towns might be relieved by a uniform consolidation at 31, or even 4 per cent., it is worth while to glance down the alphabetical list of New Zealand municipal loans as they stand in the London Stock list.

Eirst comes the City of Auckland, which has the following loans outstanding (1) £46,500 (£IOO,OOO authorised) at six per cent., redeemable in the years 1899, 1904, 1914, and 1924 respectively ; (2) £10,300 (£25,000 authorised) at six per cent., redeemable in 1926; (3) £181,300 (£250,000 authorised) at six per cent., redeemable in 1930 ; and (4) £IOO,OOO at five per cent., redeemable in 1934. The City of Christchurch has a Drainage Loan of £200,000. at six per cent., redeemable in 1926. The City of Dunedin has the following outstanding :—(1) £109,100 (£116,700 authorised) at six per cent., redeemable in 1925 ; (2) £91,600 (£300,000 authorised) at six per cent., redeemable in 1906; (3) £312,200 (£600,000 authorised) at five per cent., redeemable in 1908. The town of Invercargill has an £BO,OOO loan at six per cent., redeemable in 1893 and 1910, and one of £150,000 at four and a half per cent., which does not mature till 1936. The borough of Napier has a drainage loan of £70,000 at six per cent., which runs till 1914. The Oamaru municipality has two waterworks loans, both bearing interest at seven per cent., the one of £60,000 maturing in 1907, the other of £50,000 in 1910. Palmerston North has a £50,000 loan at five per cent, for water supply, drainage and lighting, which is redeemable in 1915. Next we come to the borough of Timaru, which has a debt of £60,000 at seven per cent, redeemable in 1910. Wanganui has a waterworks loan of £30,000 at six per cent., which matures in 1894. Lastly, the City of Wellington has three loans all bearing interest at six per cent., viz. : consolidation loan of £200,000 maturing in 1907; (2) a loan of £IOO,OOO for city improvements ; and (3) a waterworks loan of £130,000, the two lattqr being redeemable in the year 1929. It is sufficient to glance down this long list of large sums bearing a high rate of interest —generally 6 or 7 per cent—to see at once what substantial relief would be conferred by the adoption of a system of general consolidation at 4 or 3i per cent. Nor is there in reality any practical disadvantage in increasing the principal nominally repayable at a remote future date, because, as we pointed out in the special case of Wellingion, these loans will almost certainly be re-is3ued at maturity instead of being repaid at all. They will - most likely be reissued at 3 or 2&, or perhaps even 2 per cent.—judging from the present steady downward tendency of the rate of interest, the persistent cheapening of money—and if so, it can readily be demonstrated by a familiar process of calculation that, although there may appear on paper to be a loss on the principal, there will, in reality and in practice, be a substantial gain looking at the aggregate sums represented by

the nominally-increased principal, and the actually-reduced interest. If to these municipal loans we could add the debts of the numerous Harbour Boards the case for consolidation would become even stronger, for these latter loans represent altogether some three millions sterling. But the harbour loans stand on a very different fooling. They differ widely not ody from the municipal loans, but also one |from another in point of soundness and of securities. It ia very doubtful whether any plan could be devised that would bo fair all round in its operation and yet have any chance of general acceptance. This is a matter for future and separate consideration. But the amount of the authorised municipal loans, which is not far short of three millions, is a sum large enough in itself to form the basis of a very respectable operation in the London money market. Probably the consolidation could be effected on better terms if carried out as a single scheme including both municipal and harbour loans, but even the former alone would constitute an undertaking quite big enough to be worthy the attention of financiers. „ We trust that this idea will not be allowed to drop, but that the seed will take root and fructify. So largo a scheme could not bo carried into effect off-hand. Its realisation will necessarily depend upon skilful, patient and prudent negotiation, and this will require time.