THE PUBLIC DEBT

Poverty Bay Herald, Volume LV, Issue 17241, 24 April 1930, Page 7

THE PUBLIC DEBT

REVIEW BY PREMIER SMALL INCREASE SHOWN THIS YEAR'S MATURITIES (Special to the Herald.) ROTORUA, this day. The public debt on March 31 last amounted to approximately £267,380,00(1, according to the statement made by the Prime Minister, Sir Joseph Ward, to-day, the figures again being provisional and subject to audit.

"This is a net increase of £3,190,000 for the year," explains Sir Joseph. "it may lie explained, however, that this unusually small increase was due to the fact that £5,380,000 of the new loan moneys raised in the previous financial year, being part of the £7,000,000 London loan raised in January, 1929, was really part" of this year's finance. The new loan moneys received during 1929-30 totalled approximately £5,700,000, including £1,620,000 in London, being the last, instalment of the £7,000,000 loan of January, 1929, and £4,000,000 obtained from local issues. As a partial setoff against these new issues there were redemptions of debt during .the year amounting to about £2,510,000, leaving the net increase at £3,190,000. "As already stated, of the redemptions some £40(5,000 represented' funded debt payments to the British Government, and £1,100,000 the operations under the statutory debt repayment sehemej while £260,000 came from reparations, and' the balance from other accounts. CONVERSION OPERATIONS. "The most important debt operation during the year was the satisfactory arrangements made for dealing with the balance of the 4 p.er cent. New Zealand Consolidated" Stock, which was due on November 1, 1929/ On April 1, 1929, there was still £11,274,000 of this stock in the hands of the public. A further conversion - offer to convert up to £5,000,000 of 4 per ' cent. 1929 stock into 5 per cent, stock at par, to mature on July 1, 1945, with an option to the Government to redeem . on or after July 1, 1935, together igrith J a cash 'payment of £2 per cent, on November 1, Was made to holders of the old stock in September,, 1929. This s offer was underwritten, and was taken up by holders to the extent of ■ £3,628,000. In view of the fact that' the London money market at that time was seriously disturbed by the " reactions from the boom on the New - York Stock Exchange, coupled with 1 the Hatry affair and the outflow of gold to the European market, the Do-' minion was fortunate in placing the » stock on these terms, which were favorably commented upon by London financial papers. The remaining £6,274,000 of 1929 stock was eitherpurchased before maturity, or repaid at maturity. The necessary funds for these operations were provided from New Zealand, £672,000 being provided out of debt repayment moneys, and the balance from the proceeds of local issues in redemption. . "The conversion and redemption of the £29,490,000 of 4 per cent. Con- • solidated Stock was the largest and most important financial operation in the Dominion's experience, and when it is remembered that it had to be largely carried out over a period when the London money market was adversely affected by international complications it will be realised that the Dominion is to be congratulated on the successful termination of these large operations. It may be added that the transaction resulted in approximately £1,170,000 of the debt being repaid, and in about £6,000,000 of the debt being transferred from London to New Zealand, which fact is of, considerable significance economically." INCREASED INTEREST RATES. "While dealing with the public debt 1 would like to refer briefly to the rise in the interest rates at which local issues are made. The rate was increased from 5£ per cent, to 5£ per cent, on January 9, 1930, and I have received many protests against the action taken in this connection.- I need hardly say that the Government is desirous of obtaining as cheaply as possible the necessary capital for carrying out its policy in connection with public works, land settlement, State advances, etc. It was found, however, that as a result of the high rates offered in Australia, and the relative scarcity of capital that the amount required by the "Government could not be obtained at the rates previously offered. The. local requirements of the Government were also affected by the large sums it was found advisable to provide for the redemption of the 4 per cent. Consolidated Stock already referred to. "The Government cannot control the price of money any more than it can control the price of butter, or any other commodity for which there is a worldwide market. The Government, in order to carry on its programme, approved by Parliament, thus had no option but to increase the rate of interest on debentures, and inscribed stock issued in New Zealand. -- "Loans falling due in New Zealand duing the current financial year include the following amounts held by the public: £1,041,680 bearing interest at 5\ per cent,, due on July 1 next; £326,900, hearing interest at 5 per cent., due on July 15 next; £4,887,840, bearing interest at 4-L per cent., due on September 1 next. In regard to the first two loans T have to announce that holders of the securities will be offered a renewal for a further period from the respective maturity dates to February 15, 1937, with interest at BA per* cent., payable on August 15 and February 15. Holders of Inscribed Stock will shortly be communicated with direct from the Treasury, and applications for a renewal of this form of security, as well as bearer debentures on issue in respect of these loans, may be made at the offices of the Treasury at Auckland, Wellington, iChristchurch, and Dunedin, or at any branch of the Bank of New Zealand in tne Dominion. The terms to be offered to the holders of securities in the £4.887.840 4£ per cent, loan will be announced later." ;