THE OTAGO DAILY TIMES TUESDAY, July 11, 1939. HALF A LOAF?

Otago Daily Times, Issue 23857, 11 July 1939, Page 8

THE OTAGO DAILY TIMES TUESDAY, July 11, 1939. HALF A LOAF?

The confident statement of the Prime Minister last evening that " there is every reason to assume that Mr Nash has just about achieved success" in his London mission is in marked contrast with the reports from the usually wellinformed sections of the English press during recent days. If, after six arduous and, so far as could be ascertained, unprofitable weeks of negotiation in England the New Zealand Minister of Finance has succeeded at the last minute in melting the hard hearts of British investors, there is some reason for Mr Savage to feel gratified, and every reason for the people of the Dominion to experience a sense of relief. New Zealand has been faced with the unpalatable fact that the country's credit has not been such as to inspire great confidence in the overseas investor. All reports from London have suggested that the problem of finding £17,000,000, to redeem loans falling due in January, vuuld tax the ingenuity of Mr Nash to the utmost, and that a sufficient export credit to meet the country's needs during the coming months would not be obtained except through the granting of British Treasury export credits. The alternatives were not attractive. Mr Nash might endeavour to raise a loan elsewhere —in the United States for instance—which would be a very difficult matter, since the American investor is in no way more likely than the British investor to regard New Zealand in present circumstances as a profitable field for investment. Or New ' Zealand could decide to attempt to carry on from month to month, meeting payments in London as they fall due, from the remaining sterling funds. Since, as has been pointed out, the trade balance at this time of the year, until January when the export season opens, is normally against the Dominion, it was extremely doubtful whether the most stringent conservation of sterling funds would provide sufficient accommodation, and there was the distinct possibility that there would be default in commercial payments.

What the New Zealand Government has presumably done is to obtain a grant undc: the Export Credits machinery of funds to enable default to be avoided. It is anticipated that a considerable portion of the money so obtained will be devoted to purchasing defence materials in England, of which the Dominion is greatly in need. The balance, no doubt, will be made available to meet other New Zealand necessities in London, and will serve to tide the country over the extremely lean period until credits have been built up through exports to the United Kingdom. That this Dominion should be placed in the need of availing itself of the provisions of the Export Credits system is little short of humiliating. The Export Credits Guarantee Department was set up by the British Government for the purpose of retaining and expanding export markets in the face of aggressive competition from other States, principally the German Reich. Under this scheme the department is empowered, with the consent of the Treasury, to give guarantees in respect of exports when a greater risk is involved than the private trader might be prepared to take on his own responsibility. It is intended to apply, as was explained earlier in the present month, when amendments to the legislation were introduced, " in respect to transactions which, though not commending themselves on purely business grounds, yet appear to be desirable in the national interest." No doubt

the British Government must consider it in the national interest that there should be no default in New Zealand's payments to Great Britain, and has suggested this method to Mr Nash of meeting the Dominion's present position. Default, apart from virtually paralysing the ordinary business dealings of the New Zealand importer with England, would have had most serious and unfortunate repercussions in London financial circles. As to the £17,000,000 loans, it would appear that an arrangement is being made which satisfies the Government. A recent suggestion of the Financial News was that they would be met by short-term borrowing—a device which must prove costly and, inevitably, less than satisfactory, as it can only defer temporarily the day when New Zealand must meet increasing loan redemption obligations. The public of New Zealand has been kept entirely in the dark as to the progress—or as it has seemed until now, the lack of progress—made by Mr Nash, and is still awaiting some definite information as to the success he has " just about" achieved. If the arrangements that are being made are on the lines indicated as probable in English despatches, New Zealand will have less cause for exaltation than might be assumed from Mr Savage's pronouncement. But half a loaf is better than no bread, and there will be some satisfaction in news of success even of the partial nature which is all that, in the absence of specific information, can be anticipated in the unfavourable circumstances which marked Mr Nash's approach to the New Zealand Government's principal creditor.