THE ACCESSION OF BRITISH CAPITAL AND THE PROSPECTS OF CHEAP MONEY.

Otago Witness, Issue 1499, 7 August 1880, Page 22

THE ACCESSION OF BRITISH CAPITAL AND THE PROSPECTS OF CHEAP MONEY.

(Australasian and Insurance Banking Record,) The intensity of the financial crisis of 1879 throughout the Australian Colonies and New Zealand is amply proved by the absorption of the' large amounts of extraneous capital which have during the last few months been attracted hitherwards from the world's monetary pivot, the London Stock Exchange. Under ordinary circumstances, the simultaneous advent of such large additions to our borrowed capital would undoubtedly have " brought down the rate of usance here with us " rapidly and considerably. But to such a pass had we been reduced by adverse seasons, .with their attendant evils of ruined harvests and diminished wool clips j by unprofitable trade, and the reaction of the Bevere mercantile depression throughout the world} and lastly, by the difficulty of retrenchment when we were bo long used to living fully up to, if not beyond our means, that the long-prayed-for relief to the trading community is postponed until we have filled up the gaps in our reserves, which had been depleted by three years of financial difficulty, anxiety, and loss. Irrespective of the Government loans, as set forth hereunder, there has been much additiorial capital brought in by advances to public bodies like the Wellington and Oamaru waterworks, which between them have placed over half a million debentures in London, while the following finance companies have all been successfully floated since last Christmas :— The Australian and New Zealand Mortgage Company, capital L 1,000,00 0; the Australian Land ,and Pastoral Company, L 500.00 0; the New ' Zealand Mortgage and Investment Asßooiation, L 500.000; the South Australian Land Mortgage Company, Ll,000,000 ; and the Australaßian Mortgage and Agency Company, L 1,000,000. It is not, of course, contended that the whole four millions represented by the capital of these companies panics will be at once available, or even called up, but they nearly all take power to isßue debentures, which, with the paid-up capital, will no doubt rapidly approach the substantial figures named, as soon as the securities come to the front. The Australian Agency and Banking Corporation has also placed 20,000 of its LlO shares on the London market, and simultaneously the New South Wales Mortgage Loan and Agency Company has advertised for tenders for L 300.000 of its five per cent, debentures. To these substantial ventures there falls to be added the capital subscribed in England far the frozen-meat export companies, of which Victoria, New South Wales, and Queensland each claim one, and finally a further L 60 ,000 loan of our own Metropolitan Gas Company. We may fairly estimate the abovenamed borrowings of the various municipal and kindred corporations at three-qnarters of a million, and the imported capital of the trading companies at L 3.000.000. It will be well within the mark to say that the wool clip of all the Colonies is not less than L 2,500,000 more valuable than that of last year ; and that the export of grain to foreign ports from South Australia, Victoria, and New Zealand is fully L 3,000,000 in excess of any previous period. Assuming these figures to be approximately correct, we get the following astounding total addition to our financial resources, though of course the bulk of it is added to our indebtedness :—: — New Zealand loan .. ■• ..£5,000,000 Queensland loan 3 > m >°3 South Australian loan .. .. 3 >250>000 Various public works loans .. .. 750,000 New financial companies, &c. .. .. Increase in value of grain shipments . . 3,000,000 Increase in valae of wool clip .. •• 2,600,000 Making together the sum of . .£20,500,000 This euormouß sum will be further increased by the L 2 000,000 balance of the Victorian loan, which the late Treasurer pledged himself not to ask for until September next, but which 13 now urgently needed by the Treaburer, and can hardly be postponed beyond that date, unless indeed the finances are not to be considered until tho interminable battle of constitutional reform is finally disposed of. In the face of these vast accessions to the operative capital of the Australasian Colonies, the maintenance of 8 par cent, and 9 per cant, discount rates (even allowing that the best and abortesb paper is occasionally done at 7 percent.) becomes an impossibility, and we do not hesitate to say that an early reduction of at least 1 per cent, is inevitable. Possibly a desire first to ascertain the results of the half-year just closed may have retarded the movement in some quarters, but it cannot now be muoh longer delayed. We would gladly see joint Australian action in a matter of this moment, but even if it were necessary for our Victorian bankers to

set the example, a redaction of the minimum rate of discount to 6 per cent, and the maximum rate of Interest on deposits to 4 per cent, would do bo much to stimulate trade and improve the value of investment stocks and real property as to ensure a condition of pros* parity that would be more potent than argument in inducing the other Colonies to follow Victoria's example.