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Otago Daily Times, Issue 2723, 28 October 1870, Page 2

When the financial proposals of the (jiovornment were laid before the House, the provable effect on the value of our securities in the London money market was one of the first considerations suggested by them. It was predicted by more than one member of the Opposition that the effect would be prejudicLil, and that a fall in the price of debentures would follow immediately on the announcement of the new loans. In the course of the debate on the Financial Statement, Mr Kicii-MOXO said:— 'There is no doubt that, on the appearance in the money market of the policy enunciated by the honourable member, the colonial bonds must be reduced in value.' Mr Rollestox remarked on the same occasion :— ' What would be the effect of an announcement in the money market that a loan, which already amounted to over seven millions, might in a short time be more than doubled 1 The elfect would be to diminish the value of the securities of those bondholders who had come in under a misapprehension, and to destroy the credit of the colony.' Predictions of this kind were common enough, and the quotations we have given may be taken as representing a very large proportion of public opinion on the subject. The last mail has settled the question. It has brought intelligence of a serious and sudden fall in New Zealand securities, rendered the more striking from the favour in which they ,vere previously held. The quotations by the previous mail, which brought news to the Gth of August, were :— Sixes, 112; Fives, 100. By the last mail, which brought news to the sth of September, they stood thus :—Sixes, 105 to 10S ; Fives, 93 to 95. It may be said that the panic on the Stock Exchange, created by the outbreak of the war, is responsible for this fall. But it may easily be shown that the panic on the Stock Exchange had nothing at all to do with it. It is well known that, in the very height of this panic — that is, immediately after the declaration of war on the 1-tth July— colonial .securities generally were not affected by it; and the quotations we have given as brought by the August mail are su Hicient evidence of the fact. There is no room for doubt when we find that Victorian debentures, which stood at 1 G'7 in August, had risen to 108 to 111 in September—at the very time when the fall in New Zealand debentures took place. It is a clear inference that some exceptional cause must have been at work to produce this decline in the value of our securities. The explanation will be found in the fact that the July mail, which took home the Financial Statement of the Treasurer, was delivered in London on the ii:"ith of August, in forty-nine days from Auckland. Nothing is more probable in itself than that this result should have been brought about by the unexpected proposals contained in the Statement. There is no reason why a war in Europe should depreciate the value of colonial stock; but there are obvious reasons why a proposal to double it* debt, made by any colony whatever, should injuriously affect its securities. The holders of its bonds at homo are not likely to place unlimited faith in its borrowing powers ; they can only be expected to regard every addition to its debt as a diminution of their security. The circumstances of New Zealand lend peculiar force to this view of the case. Jfe.ivily burdened with debt, not overflowing with population or productive industries, and liable at all times to outbreaks of savage w.-irfaiv, it is not by any means in a favourable position for operating on the money market. A very slight consideration of the subject, it might be supposed, would be enough to satisfy any Treasurer thar a di maud for a fresh loan, under such circumstances, is a very delicate transaction. The risk of damaging1 the public credit is not to be lightly run. The proposals originally put forward in the Financial Statement involved the borrowing of

six millions sterling, to .sty nothing of ntlicr Haliilitie- : they were submitted to tlit; notice of the financial world at a peculiarly unfortunate time, and they were open to very grave objections on the score of vagueness as to the expenditure. It would have been a matter for surprise if, under such ehcumstances as these, the bonds of th'l colony had not suffered. We- do in't believe that this loans would have been obtained, even if the. yieace of Enrop" had remained unbroken, without a heavy sacrifice on the part of the colony ; and if the present proposals are adhered to, we may expect to find the opinion of the Stock Exchange expressed in such quotations as we have given above. Should it prove to be so, there will be an cml to borrowing for many years to come, and an end to the day-dreams of artificial prosperity in which we have been bidden to indulge.

A question of peculiar importance in connection with this matter remains to be settled. Attention was repeatedly drawn to it in the House, but no satisfactory explanations were afforded by Ministers. It will be recollected that the Commissioners wrote out to complain of certain .statements made by Mr Fitzgerald, the Comptroller ot the Revenue, in a pamphlet which that gentleman had just published in London. Their words are significant :— 'In addition to the more prominent duty of our mission, we are engaged in a large operation, the reopening of the consolidation. The question is put to us, whether the Government mean to bring out a new loan, and we definitely answer that there is no such intention, and that we earnestly hope still to avoid throwing a new loan on the English market, pointing to the sale of the Treasury Bills as an instance of our credit being higher elsewhere than in London. At the very moment when we are making these statements, and working out a financial operation of great delicacy, the Comptroller of Revenue announces on the London market that " New Zealand cannot long go on without a fresh loan."' The language of the Commissioners appears explicit. To ordinary readers it conveys a very distinct impression that the Commissioners were quite in ignorance of the intention of their colleagues to throw a fresh loan on the money market, and that they had assured the public that no further loans were contemplated. That being so, the question at once arises whether Ministers can be said to have kept faith with their colleagues the Commissioners, and through them wiih the public creditors at home. It was stated in the House, from the Treasury benches, that the Commissioners were made aware of the nature of the financial proposals to be laid before Parliament, long before their letter with reference to Mr Ititzgki!ALD was written. The explanation of their statements given at the time was to this effect :—

That when the Commissioners asserted that no new loan was in contemplation, they referred merely to loans for administrative purposes, and not to one for immigration and public works. It seems to us that the statements made by the Commissioners are too distinct to be explained away. If they were aware, as Ministers assert, that an enormous loan was about to be proposed, they could hardly have suppressed the fact when dealing with the bondholders. If they made it known, the effect on the value of our securities would have been felt at once. The fact that those securities suffered no decline until August, is strong evidence that nothing was said by the Commissioners about the six million loan, previous to the circulation of the Financial Statement. The position of the Commissioners in this matter is an awkward one—in fact it amounts to a dilemma. They cannot escape the necessity for explaining the facts of the case; and until we hear their explanation, we shall be compelled to doubt whether they were simply kept in the dark by their colleagues, or whether they kept the bondholders in the dark until they had consolidated the debentures.