MONEY FOR INVESTMENT.

Otago Daily Times, Issue 19252, 16 August 1924, Page 2

MONEY FOR INVESTMENT.

AUSTRALIA AND NEW ZEALAND,

MR RANSOM'S STATEMENT.

(From Otth Own Correspondent.) WELLINGTON, August 14

With regard to a statement in the House of iiepresontativos yesterday by Mr Ransom (i’abiatua) about an outflow of money from New Zealand to Australia because of the higher interest obtainable there, inquiries made in financial circles here indicate that the banks are not remitting large sums of money to Australia on their own account, but that certain sums are being remitted there through the medium of the banks because of the higher interest obtainable there. Inquiries made by a Post reporter elicited the statement that something like £2,000,000 had been raised in New Zealand by local bodies through institutions domiciled in Australia and on debentures, the principal and interest of which were payable in Australia. The payment of that interest, of course, represented the passing of a substantial sum in the aggregate; of New Zealand money to Australia. The market there was better for the re-employment of such capital. It was common knowledge that if one could transfer funds from New Zealand to Australia at about par the gilt-edged attraction in that market would be 6g per cent, and over. An investor domiciled in New Zealand would have to pay income tax, but some of the Australian Government investments were free of income tax, and they returned up to 6i per cent. The return from the Melbourne Metropolitan Board of Works debentures with the short currency of 10 years was 6J, per cent. Where was there a local body in New Zealand offering so good a rate? it was asked. In New Zealand it was 5i per cent, or 5| per cent., with principal and interest payable in Australia. The Government of the dominion had been trying in vain to force people to advance money on land instead of for local body debentures (it was said), and it had endeavoured to divert the capital from them to the land by the means of raising the tax on these debentures from 5s to 4s 6d in the £l. The effect had been to cause the rate of interest on these debentures to be raised in order to cover the additional taxation. In other words, the tax had been passed on. Efforts to send quite big sums of money from New Zealand to Australia had certainly been made owing to. the better return obtainable there, but if more notes were issued, as was intended, then the currency would be expanded and money would become cheaper than it was al the moment.

It was pointed out in connection with the issuing of these additional notes that there was an abundance of gilt-edged securities held in London by the Australian banks, and these could and no doubt would, be deposited with the Commonwealth Bank in London, which could in turn provide an equal amount of currency in Australia for the banks against such securities. The outcome of the additional currency to bo provided for Australia would naturally be watched with great interest here. It might be that money would cheapen there in consequence, and so the attraction of capital from the dominion, to the commonwealth would be somewhat, lessened. After all, the question whether there was an excessive or only moderate outflow of Now Zealand money to Australia was of not quite so much importance as why New Zealand investors were seeking investment away from home. They had a right to do what they liked with their own money, and if the.w could obtain a better return for it elsewhere than in New Zealand then elsewhere it would go., CONFIRMATION FROM AUSTRALIA. Press Association—By Telegraph—Copyright. SYDNTY, August 15. (Received August 15, at 9 p.m.) With reference to Mr Massey’s statement in the House of Representatives that money was being sent from New Zealand for investment in Australia, it is explained that funds invested in Australian Government securities yield about 1 per cent, more than similar investments in New Zealand.