LOAN ISSUES.

Otago Daily Times, Issue 20643, 15 February 1929, Page 11

LOAN ISSUES.

NEW ZEALAND PREFERENCE ON LONDON ! MARKET. AUSTRALIA AGITATED. (From Our Own Correspondent.) SYDNEY, February 7. Australia is greatly agitated over the' fact that New’ .Zealand always secures better terms than the Commonwealth for loans raised in the London market, and that loans raised by the Dominion al> most invariably command better public subscription. The loans issued last month by the Governments of each country provided a further example of the advantage gained by New Zealand compared with Australia. The disparity was so great that public men and financiers generally are beginning to examine the position fully in the hope of finding some explanation. The New Zealand Government floated a loan of £7,000,000 which yielded the investor £4 Ids 5d per cent., whilst a week later the Commonweath, on its own behalf and on behalf of the States, floated a loan of £8,000,000 yielding £5 2s 3d per cent. Reasons put forward to' explain the disparity in rates are mainly the huge public debt of the Commonwcaltsi ; .id the States, the low ratio of pnvt'’ i to the public debt, and the heavy bor* rowings on the London market., w.ncially in Australia it is contended that a comparison between the Commonwealth and New Zealand does not support these reasons. To prove this the public debt of both countries has been critically examined, and it has been shown that the public debt per head of population is greater in New Zealand than in Australia. The figures that have been quoted are:— Year. Australia. New Zealand. 'l 1923 .. £159 3 9 £165 4 2 • 1924 .. 164 0 3 164 8 S 1925 .. 162 810 165 211 1926 .. 167 9 8 169 8 6 1927 .. 169 4 8 170 19 5 ' These figures include the deadweight burden imposed by the Great War. By excluding the war debt it is claimed that an effective comparison can be made of the debt incurred for developmental purposes. ’ The debt per head in Australia increased from £96 6s 8d in 1923 to £ll6 7s 8d in 1927, while in New Zealand it increased from £lO6 10s 5d to £125 8s 4d. It has been indicated that the per capita burden of Australia’s public debt during the last five years lias been consistently lower than that of New Zealand, and in the case of what might bo called developmental debt the margin in favour of the Commonwealth ia considerable.

On the assumption that the value of the production of a country is a fair measure of that country’s ability to meet the obligations of its debt, the position of Australia in that connection has also been examined. In 1025-26, the latest figures available, it is shown that the percentage of production to the public debt in Australia was 42.55, whereas in New Zealand it was 48.55. Although here the Dominion makes a slightly better showing than the Commonwealth, the difference in the position is not officially considered sufficient justification, for the preferential treatment accorded by the London market. ' , In dealing with the question of the alleged heavier demands made by tb!o Commonwealth on the London market, it will be found that, having regard to the population of botli countries, tliih statement, according to figures issued officially, does not find support in actual fact. Duing the last five yars the borrowings of the Commonwealth and States on the London market averaged £24,240,000 per annum, while the average for New Zealand in the same otriod was £5,800,000. Viewing these figures from the point of view of per capita uiirden, it is found that, on the average population during the same.five years, the annual borrowings of the Commonwealth and the States on the London. market averaged £3 19s 4d per head of the population, whilst the borrowings of New Zealand averaged £4 5s lid per head.

Australians are keen to point out that an important fact to be borne in mini when examining the loan policy of the two countries is the different problems that confront the respective Governments. In Australia there is a territory of 2,974,518 square miles, while in New Zealand the area., to be ; developed is 103,862 square'miles. .