NEW ZEALAND LOAN

Otago Witness, Issue 3513, 12 July 1921, Page 55

NEW ZEALAND LOAN

MR MASSEY SATISFIED. LONDON, July 4. Dealings in the New Zealand loan were made at j per cent, discount, but recovered to par later.j July 5. ! Mr Massey is satisfied with the result of the New Zealand Loan. He points out that it is at 6 per cent., whereas others were 6j- per cent. An attempt to “bear” the loan failed, and it is now at a premium.' STATEMENT BY SIR FRANCIS BELL EXPECTED. (Froii Oub Own Correspondent.) WELLINGTON, July 6. ! The fact that the English underwriters have been left with 58 per cent, of the New Zealand five million loan on their hands, is a clear indication of the value of hard cash at the present moment, and also of the unreasonableness and the futility of the recent Farmers’ Union protests against the present rate of interest charged by the banks. There is, however, a crumb of comfort in the fact that the New Zealand issue has been more favourably received in j London than the recent efforts of Australian | Governments to raise money there. At the ’ same time it does not indicate any keen I anxiety on the part of the British public to invest their spare cash in overseas loans, even on the favourable terms now offered them. No doubt the fact that the public did not take up half the loan may bo partly attributable to the recent industrial crisis, which had considerably disturbed the i market, and had made investors eonserva- ! tive. It may be presumed, however, now I the coal strike has been settled with a consequent prospect of improvement in British industry, that the underwriters will be. able soon to satisfactorily unload the amount of the loan remaining on thenhands. The fact that though the first dealings in the loan in London were made at a g per cent, discount, and that there was a recovery to par later, seems to warrant this assumption. Money is clear and this must be recognised by overseas borrowers, as well as by those needing money in the older countries. In this connection it must also now be fully realised that any artificial attempt to keep down the rate of interest is not likely to result in permanent good to the community, any more than is an undue interference on the part of a Government, with trade. Though there was a chorus of approval of the recent legislation by the New Zealand Government in extending the moratorium to save trading concerns, such as farmers’ co-operative societies, that against warnings in the past continued to pay interest on large sums of money left with them at call Many of those best qualified to express an opinion think that such interference on the part of the Government was a mistake, Though at, the time it might have prevented a few crashes, the result on the whole, they assert, has not been beneficial to the dominion. It simply means that other institutions that have adopted a more sound method of finance have to suffer. They are getting for much of their money now, only per cent., when they ought to be getting seven, and after all the protected companies themselves ere nowunder the necessity of raising, money at 7 i per cent, to redeem the call money upon which they have been trading. Whether they are getting much of this new money from the general public or not remains to be seen. The presumption is that it is largely the money that has been originally left with them at a much lower rate of interest, when times were more prosperous that is now being invested at the much higher rate. Thus the financial pond is once more getting back to a natural instead of an artificial level. Moreover, financially, the world over must necessarily look askance at any such Legislative interference. The amount of money received by the New Zealand Government will, of course, somewhat less than five millions, as there will be underwriting- and other expenses to bo deducted, and they are receiving only £96 for every £IOO of the loan. In any case the sum available is not sufficient. to justify what seems to l>c the prevalent opinion, that there will be any great extension of public works as the result of the operation, because the committments and impending committments for hydroelectric works and railway material will absorb probably two millions of the new money, and the Public Works Fund is already indebted to the Consolidated Fund to a considerable extent. At the present moment there can be very little money at credit in the. Public Y ork- Fund, and (here has been or will be to some extent a drain on it to prevent unemployment. So far there is a surprising dearth of information regarding the floatation of the new loan, but now that the country is assured of getting the money, the time seems opportune for a clear statement of the financial posh ion generally. Possibly the Acting Prime Minister (Sir Francis Bell) will nowmake the statement that has for some time past been expected. It has no doubt been delayed pending the news of the success of Ah- Massey's efforts in London. MONEY TO BE USED IN LONDON. WELLINGTON,. July 7. There appears to be an impression, abroad that the local monetary position may be relieved to seme extent bf the £5,000,000 loan, which the Government recently had j floated in London. A statement, maue oy Sir Francis Bell, Acting Minister of Finance, should remove that impression. He staled that the Government had c-or tain obligations to meet in London, including inteiest payments, and the money will t,,." used for that purpose. Beside- these obligations, these will be payments due on railway material and equipment, also electric rolling stock and other equipment for the Oliva tunnel and other hydro-electric undertakings. The payment of this expenditure out of the money made available in London will obviate the necessity of trenching- on local supplies, which are required for expenditure within the dominion.