LONDON FUNDS

Otago Daily Times, Issue 23857, 11 July 1939, Page 9

LONDON FUNDS

ALARMING DECLINE FAULT LIES WITH GOVERNMENT RESERVE BANK BORROWINGS (Special to Daily Times) AUCKLAND, July 10. " The steady and alarming decline in our London funds during the past few years has taxed to the limit the ingenuity of the Labour Government in the matter of finding excuses," said Mr R. M. Algie during an address on the nature and decline of New Zealand funds in London to a meeting at Northcote. " It is the unfortunate practice of some politicians to trace everything to slave camps and to soup kitchens," he continued, " but these and similar arguments cannot be relied upon in order to account for the disappearance of so many . illions of our sterling funds. No one can say that the enormous drain on our London balances was due to the actions of the previous Government, because, as we all know, the disappearance of our funds has occurred during the term of office of the present Labour Government.

Subject to Political Influence

" For a similar reason it is impossible to say that the loss of our London funds has been due to the depression. One most important cause, which is not sufficiently emphasised, is the fact that our London funds are more or less subject to the control of the Reserve Bank and the Reserve Bank itself is subiect to political influences. Much of our present trouble arises from the fact that the Government, through its control of the Reserve Bank, has borrowed large sums of money from that bank and we are cheerful optimists if we believe that the position will become much easier so long as those borrowings remain unpaid and so long as the Reserve Bank is under the control of a single political party. "If Mr Nash finds that the London lenders are somewhat inclined to raise the rate of interest or to impose fairly stringent conditions before parting with their money for investment in New Zealand, there may be some in this country," Mr Algie said, " who will wish to argue that the London financiers are merely seeking to curtail or to crush the activities of the Labour Government. Words like ' raids ' and ' gangsters' may appear in such arguments. Such a view, however, would really be quite untenable. We must remember that Australia has recently failed to secure a loan on the London market. Australia is a free country commercially compared with New Zealand, and she has not been borrowing like the Labour Government.

Question of Security

"When our Minister of Finance tries to raise money in London on behalf of New Zealand," Mr Algie said, "it is not politics or party labels or old school ties that matter. It is all a question of the rate of interest, the value of the security, the ability and willingness of the borrower to repay, and the purpose for which the money is to be used. These are the principal factors which lenders everywhere take into consideration. The higher the rate of interest Mr Nash has to pay and the more numerous or more severe the conditions to which he has to submit are simply ordinary signs by which any of us can judge as to what the lender thinks of the value of th*> security offered to him."