AUSTRALIAN FINANCE

Otago Daily Times, Issue 19529, 11 July 1925, Page 12

AUSTRALIAN FINANCE

RAISING OF LARGE LOAN. PORTION SOUGHT IN NEW YORE. Press Association —By Telegraph—CopyrightMELBOURNE, July 10. It is learned definitely from official sources that the Commonwealth Ministry lias decided to raise a loan on behalf of itself and the States, partly in Loudon and partly in New York. The amount will be from £10,000,000 to £15,000,000. The terms are not yet announced. FEELING IN LONDON. A NOTE OB' DISAPPOINTMENT. AUSTRALIAN ACTION RESENTED. LONDON, July 9. Special inquiries show that the Stock Exchange was surprised and disappointed at the Commonwealth Government’s decision to raise a l(X),Qp0,000-dollar loan in New York. Most of the influential authorities state that the London market is distinctly hostile to the dominions borrowing outside Britain, which will be bad for the prestige of London as a financial centre and bad for British trade/ as America is sure to see that trade follows tho loan. It is .asserted that Britain could well supply all the dominions’ needs, provided that suitable times are chosen for tho issue of loans. The market hero was in the first instance unwilling to accept the accuracy of the New York reports, but Melbourne confirmation, now received, states that tho Imperial Treasury has approved of the Commonwealth’s departure from the established practice of borrowing here. Stock ’’xchang-e men declare that the money market never suggested a resort to Wall street in preference to London. This came only from the Treasury and the Bank of England, and was probably duo to anxiety over the gold standard and the desire to maintain the present bank rate, because a largo loan ait present to Australia would put the commonwealth in tho position of being able to command gold from Britain. The Stock Exchange operators declare that this did not represent their advice to tho Commonwealth Government, as they believed that Australia could obtain money as advantageously in London as in New York, though tney admitted that London might not be able immediately to absorb a £20,000,000 loan. Underwriters state that they would be content even if they were left with a large portion of the issue, as they realise that it would eventually be absorbed by the investing public. Past experience had always shown that the Americans were not an investing people. It is regarded as a certainty that if tho loan is floated in New York it will not bo long before it is unloaded on tho London market, where the quotation for dollar bonds on tho Stock Exchange would probably bo strongly opposed on tho ground that they interfere with tho sterling securities. The Evening Standard says: “The report that the loan will he floated jointly in New York and London is doubtful, because it would bo difficult to obtain support hero for colonial dollar stock, which would not find favour with investors. In all tho circumstances the Commonwealth Government would probably find it better to come to London than transfer its affections to New York, where it might find its new lover fickle in troublous times. Queensland has not found America encouraging, and has' repented of its experiment.”—A. and N.Z. Cable.

TRADE REVIVAL NEEDED.

DEVELOPMENT OB' EXPORT MARKET. VIEWS OF MORNING POST. LONDON, July 9. (Received July 10, at 8 p.m.) The Morning Post’s financial editor, dealing with the question of Australian borrowing in America, says: “Tho departure of tile Commonwealth Government in borrowing in another centre than London is both interesting- and important. It brings into prominence tho whole question of policy respecting our foreign loans, regarding for tho moment dominion loans as coming under the heading ‘foreign.’ Naturally, there is a divergence of opinion, some having the opinion that trade in Britain should he stimulated by foreign loans and that until the embargo is removed the gold standard cannot bo regarded as completely effective. On the other hand it must be remembered that no reliance can be placed on tho signs of Britain having surplus savings for foreign loans at the present time. The need of cheaper production and larger exports is becoming clearer every day. There was talk yesterday of blocks of the Australian loan being absorbed here, but we fail to see tho wisdom of such a course. Either it is safe and proper to make tho issue ourselves, as wo could do, or the matter should be left entirely in American hands. Presumably even a dominion loan, if floated in tho United Stales, would not come under tho category of trustee securities.”

The Post’s city editor adds; “The city is keenly discussing the possible details of the issue. In some repeats the announeemerjt is well received because it is regarded as calculated to help the general foreign exchange position and throw some of the burden of financing- Australia upon Now York. At tho same time there are regrets that even for a brief time America rather than the Homo Country should bo meeting the necessities of Australia. The news shows the supremo need of an early recovery of trade for the whole thing works in a vicious circle. The financial power of London is still great, but it does not consist merely of ■ credit. Hot air needs to be backed by the surplus wealth created by industry and an exportable surplus of goods and services. There must be a revival of trade if financial supremacy is to bo maintained.”— A. and N.Z. Cable. OTHER EXPERT COMMENT. EXPRESSIONS 01' REGRET, LONDON, July 10. (Received July 10, at 11.20 p.m.) The Financial Times says that the decision of the Australian Government to raise a loan in the United States is a subject of widespread discussion and considerable criticism on the Stock Exchange, the common opinion being expressed that the issue should be made in London. It is pointed out that such an issue now enjoys the status of a trustee security here.

The city correspondent of the Financial Times says; “The con-ol market gravely discussed the plan, and considerable regret was expressed at the handing over to tho United States officially, as it were, of the business of lending money to our colonies. Doubtless an eagerness to retain all the gold possible, now that the gold standard has been re-introduced, lies at the root of this rather startling departure from the good old-fashioned theory that London should maintain its position as the world’s money market.” The Financial News says ; “Admittedly wo have been suffering from a steady demand for our money from the dominions, ami if the Commonwealth can obtain belter terms elsewhere it is justified in obtaining them, but it must bo realised that no dumping by American interests will lie allowed on this side.—A. and N.Z. Cable.

BRITISH CAPITAL EXPORTS, Discu snug lli'llish capital investments alitoa.d. Mr T. K. flroqnvy says, in the Lankin" supplement of The Times, that t.lip volume will in ceneral lie determined iti Uie futiir*, as in the past, kjt tics :»uo

of the national surplus over consumption, and by relative interest rates at home and abroad. Capital shortage on the Continent (together with the political risks) will keep rates up there and elsewhere; the increase of population in the new regions of the earth will tend to reduce rates there and elsewhere; high, taxation and redistribution of income will reduce the surplus available for investment (though these factors may well add indirectly to national productivity). At the moment the investor in. Britain and in the United States enjoys a quasimonopoly, but it is possible that the risks associated with European investments are being over-estimated and that, as feeling alters, the rate of return on foreign investments as a whole will fall rapidly. As regards the direction of investments, it is well to remember that sentiment as well as tlie provisions of law encourages investment inside the limits of the Empire. As compared with pre-war years the proportion of investment in the Empire is considerably greater relatively, and has even been in some years absolutely greater. In so far as the .total available for investment decreases, the proportion of investment in the Empire will tend to rise, for under tho Trustee Acts the Empire enjoys a distinct preference. Up to a point there is thus forced investment within the Empire, ■ though whether the Acts operate fairly as between Britain and the overseas portions of the Empire is another matter. As to tho suggestion that investments abroad should be restricted, Mr Gregory says that forcible interference is not likely to do much good, for the alternative to investment abroad is not necessarily investment at home. The alternative may well be no investment at all, but the consumption—perhaps merely in the form of leisure —of what would otherwise have been invested.