STATE BORROWING

New Zealand Times, Volume LXXI, Issue 4323, 4 April 1901, Page 4

STATE BORROWING

As borrowing in this country is very much better for the public interest than borrowing in London, the Colonial Treasurer'-must bo regarded as well advised in offering locally half a million of 1 the debenture.? authorised last session for issue. He thus gives the public the' chance to invest their money in the development of their own resources, with a sdro dividend; and under conditions which keeps the interest in the country for' further useful Work of the same kind. .. The advantage of such a state, of things to any young country is incalculable, but it is unfortunately the last state to which young countries ever attain. Last time the local public was appealed to for a similar sum it was found that,, the country had not got to the ideal state.. On the present occasion there are reasons" for hoping that/ the result may be. different. Last time the interest was one half per cent, less, ■ and the investments offering for capital were not very far different from what they now are. It is true, that the currency of. the debentures now offered is only for three years ; but four per cent, in these days of falling interest, with a security perfectly giltedged, is'an investment, not to be despised. The Government has taken, the best course to place tho matter beyond question.. If four per cent, does not tempt tho colonial public to invest idle money, then it, jnnst .be concluded that the time for the. advantage of borrowing within. New Zealand is still as far off as. it, was in 1898. /

There is another advantage,, however, which' the colony .is certain to reap, wherever tho money conics from. The cost of raising the lean here is practically nil; .while the’cost of raising it in London would be not loss than two per cent. The difference at once reduces the loan from a four per cent, almost to a three and a quarter footing. But that is not all, for a three per cent, loan in London would have cost the two per cent, all the same, and the price, in the present state of tho market, would bo seriously less than par. The issue of a four per cent, loan at par in this country on a three and a quarter basis is, without doubt, good finance. If it commands a premium as well, the advantage, will, of course? bo all the greater; but that result will not make the finance any sounder. Austialian Governments havo lately done well with local issues, bearing substantially less than four per, cent.; but there is little reason to believe that they secured that special local advantage which the New Zealand policy is seeking by means of the higher interest rate. There is ample money accnmu-

latcd in the- Govcrmnont Savings Bank and other institutions. It is presumably •u-it-li a view to inducing investment by individual depositors, rather than b> the financial institutions, that the rate o- interest has been fixed at four per cent. It is. to ho hoped that the result will justify the experiment.