THE WORLD CONFERENCE

Otago Daily Times, Issue 22067, 25 September 1933, Page 10

THE WORLD CONFERENCE

WORK OF DOMINION DELEGATES LOAN CONVERSION OPERATIONS ECONOMIC FACTORS DISCUSSED (From Our Parliamentary. Repoiteb.) WELLINGTON, September 24. A comprehensive report on the World Economic Conference, with particular reference to the work of the New Zealand delegation at the conference, wili be laid on the table of the House by the Prime Minister (Mr G. W. Forbes) as soon as the Address-in-Reply debate is concluded. Mr Forbes said yesterday that he would probably give members some time to consider the report before setting apart a day for its discussion. He and Mr Masters will also "report on their negotiations for overseas loan conversions and trade treaties. The Prime Minister repeated what he said in the Interview on his return to New Zealand that the'nations had agreed by resolution at the conference that it was preferable for their.debt burdens to be eased by an increase in the price levels rather than by the compounding agreements between debtors and creditors, without regard to maturity dates, that have been euphemistically known as conversions. He indicated yesterday that if the method of raising prices failed, then some other means would have to be considered, but the opinion of the conference was that the better way of meeting the difficulty was to increase prices. CONVERSION OF LOANS.

Quite apart from this consideration the immediate and arbitrary "conversion " of the whole of the overseas debt is believed to present so many difficulties as to be almost impossible. Other members of the delegation and no doubt the Prime Minister himself found that the British people still regard contracts as contracts and do not appreciate the arguments that the New Zealand Government does not propose to take advantage of every opportunity for conversion in the proper sense of the word. The Prime Minister has already made arrangements for the conversion of a short-dated loan of £5,000,000 in London, and this will be undertaken as soon as the Australian conversions are disposed Of. The loan is apparently the one to which Mr Forbes referred in his Budget last year as follows:—" The Government has the pption at any time after July 16, on giving,three months' notice, to repay £5,000,000 worth of bonds issued in London in 1931. These bonds are very costly to the State (approximately £8 Is 3d per cent, per annum), and it would be advisable to exercise the option as soon as conversion can be secured on favourable terms." Apart from this the amount of loans falling due in London (excluding Imperial debt repayments) totals only £5,646,400 over the next seven years, of which £5,037,000 falls due in the year ending March 31, 1935. There thus appears to be very little scope for conversion within the contractual right of bondholders. AN EARLIER CONVERSION. It is worth recalling that the Government has in quite recent yeafs carried out a legitimate conversion on the London market. On November 1, 1929, 4 per cent, consolidated stock amounting to £29,490,852 was to fall due in London. Since there would have been considerable risk in leaving the whole amount to be dealt with at maturity,, and since interest rates were beginning to shOw a rising tendency the Government exercised its option and converted part of the stock in 1928 and part in 1929. This was a conversion on a rising market and the new interest rate, averaging £4 19s 6d per cent, over the whole of the stock, was actually higher than theold rate. People are'inclined to point to the huge conversions,! which Australia has been promoting and to wonder why the New Zealand Government does not take similar action. Actually the Australian debt for which conversion has been arranged is within the optional period for redemption, and the Commonwealth has been acting strictly within its rights by giving notice of repayment in accordance with the terms on which loans were originally floated. As has been shown, New Zealand's position is materially different and the. amounts which she can legitimately convert are insignificant by comparison. RISE IN PRICE LEVELS. Discussing the increase in price levels which has already taken place, Mr Forbes expressed the opinion that it was largely due to the individual efforts of the great consuming countries. Practically all countries were trying to create favourable conditions for the recovery of prices within their own borders. The United States had raised prices by inflationary methods, and Great Britain had adopted a policy which was described in the phrase, " Cheap and ample credit," and which all countries of the Empire were endeavouring to follow. Mr Forbeß did not agree that the evidence of rising prices was in any degree responsible for the failure of the World Conference. When the conference met, he said, the price recovery was hardly apparent, and its genuineness was doubtful. Many of the countries attending were, indeed,'in a very serious condition. BRITISH RESTRICTION OP IMPORTS. The Prime Minister considers that the British Government has adopted a very reasonable attitude in restricting the importation of foodstuffs, and he has been impressed by its desire to help New Zealand. The request for a curtailment of New Zealand's supplies of frozen beef, for instance, had been necessitated by the fact that although the Dominion had estimated its supply for the year at 22,000 tons, so substantial were the holdings from the previous year on account of low prices that the actual supply promised to be 42,000 tons, or 20,000 tons greater. According to Mr Forbes's recollection the request for the cancellation of further shipments came only when the original estimate of 22,000 tons was already in Britain.