AS OTHERS SEE US.

Otago Witness, Issue 1892, 8 May 1890, Page 18

AS OTHERS SEE US.

{THE LESSON OF NEW ZEALAND.

(Melbourne Argus.) New Zealand in many respects affords just now an interesting object lesson for the study of the sister colonies. In the first place, there is no enthusiasm among the people in favour of more large loans, and this, to us, is a singular phenomenon in itself. But the fact seems undoubted. When Mr Bryce stood for the Upper Waikato district early this year he addressed himself to the loan issue, and he made the statement that it was better to go without even necessary work and to plod under difficulties than to continue borrowing. And after this frank speaking on the subject, Mr Bryce secured the seat, and with his admitted abilities he will be a powerful exponent of these fiscal views. More recently the Premier, Sir Harry Atkinson, has replied to a deputation that the Cabinet was averse to borrowing, and had not so much as considered the question of a new loan. The revulsion of feeling here indicated i& great. From taking the lead in borrowing, New Zealand has swung round to a policy of restricting borrowing to narrow limits and of doing without foreign capital for the present. The feeling, so far as it exists, is scarcely likely to be more than temporary, but it is significant that it should obtain, and that its advocates should be in a majority in the Legislature. It shows how apt a community, like an individual, is to go from one extreme to the other, and the lesson taught is the wisdom of avoiding extremes in borrowing, as in other matters.

The trade position of the colony also provokes thought. In some respects it puts the old problem of the balance of trade in a new light. Exports from the colony have of late considerably exceeded the imports into the uolony, and the general impression has been that this pointed to a large development of local production, and that ib meant a quick ret-virn to prosperity. But though values have improved in New Zealand, it cannot be said that they have increased with anything like the rapidity that was hoped for, and a new explanation is now suggested. The worst effect of the attacks which the excessive borrowing of the Governments of New Zealand provoked was not, it is said^ tho shock given to the public credit. There are many investors who know perfectly well that New Zealand is stable, and she could float national loans to-morrow at a price which a few years ago would ' have been a cause for general congratulation. Where the criticisms did harm was in weakening the confidence of private investors And circumstances directly traceable to the over-borrowing have deepened this feeling of uneasiness. Inflation led to speculation ; speculative advances have placed institutions in an unfortunate position; and somo members of the large class of people who have put out money on deposit or ou mortgage are desirous of seeing their capital back again. The consequence is that, instead of British capital ilowing into New Zealand in the old volume through the old private agencies, the tendency in rather for capital to flow back. Our excess or imports is largely traceable to loan money which is being poured into Victoria. A factor in the New Zealand excess of exports is that loan money is being sent back to England.

From this circumstance we learn that money obtained on .! no^ifc or on mortgage

from abroad is not to be regarded as a permanent investment, bat that to some extent, at all events, it is held on conditions of good behaviour. A colony which has largely borrowed on mortgage, or by receiving deposits, has given bonds for good financial behaviour. If charges of recklessness or extravagance canjjbe plausibly sustained either against its Government or its institutions, it runs the risk of frightening the sensitive among its creditors, and, whatever its resources, the withdrawal of capital means a severe strain. The pinch in New Zealand of late years has been exceptionally hard; there was no such failure of industry or of development as to warrant it; and the special hardness of the times must be largely ascribed to absentee investors who were entitled to recall their capital deciding to do so. Were such a feeling of uneasiness to spread very far, it is difficult to forecast the consequences; but the circumstance that the colonies and colonial institutions are punctual in fulfilling their obligations has naturally a steadying effect. On the other hand, New Zealand shows that withdrawals to a highly inconvenient extent are possible, and the situation suggests, first, the importance of not giving hostile critics solid reasons for their comments or the sensitive any real occasion for disquiet ; and it also suggests the advisability of institutions realising that deposits from outside have their risks as well as their advantages. Some of the more conservative of our financial associations are already paying heed to the New Zealand lesson, and are taking precautions to ensure that their liabilities to outside creditors, depositors, and others shall not exceed a certain proportion of their colonial resources. This example is likely to spread, and the action of these institutions is to be regarded as the first practical expression of the idea that publicly and privately there can be too much borrowing. Here, again, we have evidence of that quickness to read events, and of that saving common sense which, we may hope, will always be the distinguishing qualities of the commercial community of Victoria.