DOMINION STOCKS

Otago Daily Times, Issue 23528, 17 June 1938, Page 9

DOMINION STOCKS

THE FALL IN LONDON FINANCIAL NEWS COMMENT “NOT PREJUDICE ALONE” (United Press Association) (By Electric Telegraph—Copyright) LONDON, June 16. (Received June 17, at 2 a.m.) “ Prejudice alone does not account for the fall in New Zealand stocks,” declares the Financial News. The Dominion’s willingness to meet its obligations is not questioned, but the City doubts its ability to pay when the burden of increased spending encounters lean years. Mr Savage’s talk of a whispering campaign shows ignorance of the psychology of bondholders, who are naturally uneasy about what will happen when the revenue begins to contract, especially as the Government’s schemes involve an increase of 70 per cent, in expenditure compared with 1934-5. The dangers of a really sharp fall in the trade balance are considerable. Mr Savage’s statements about Government plans in the event of a depression savour strongly of pump-priming, and lend colour to the rumours of devaluation of the New Zealand pound.” 'The Financial News, however, considers that even if a bad period for commodity prices is ahead New Zealand should not have over-much difficulty in maintaining a safe margin on imports and exports. “ There is no evidence at present that New Zealand will be faced with a return of the conditions of 1930. The Dominion public debt is not heavy for a young country. Mr Savage should, however, remember that Unless New Zealand credit improves before January, 1940, it may have to pay dearly for conversion.” Summing up, the Financial News considers the strength of New Zealand’s economic position is most satisfactory and the risk essentially political, inasmuch as Mr Savage has more or less repudiated the idea that serious financial retrenchment in difficult times will ever be necessary or desirable. There is no valid reason why even in a protracted period of low commodity prices New Zealand should allow herself to get into difficulties in respect to debt service.