Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE THURSDAY, MARCH 1, 1934. AUSTRALIAN CONVERSIONS

Poverty Bay Herald, Volume LXI, Issue 18335, 1 March 1934, Page 6

Poverty Bay Herald PUBLISHED EVERY EVENING GISBORNE THURSDAY, MARCH 1, 1934. AUSTRALIAN CONVERSIONS

With the successful conversion of further loans aggregating £21,030,550, a halt lias been called to the Australian operations on the London market, for no other loans reach maturity until June 1 of next year. In the eighteen mouths since these transactions were commenced, however, a great deal has been done, not .only to ease the burden on the Australian taxpayers, but also to re-establish the country’s credit on a sound and permanent basis. Although loans aggregating £190,000,000 per annum, this figure compares the total of London indebtedness, have' been converted into more favorable issues, the total saving in interest being computed at no less than £2,461,000 per annum, this figure comparing with a total overseas interest bill, prior to conversion, of just over £26,000,000. The saving on the total, therefore, is nearly 10 per cent, while futher reductions are likely to be made in the future when other loans mature. When it is remembered that only 20 per cent of the total indebtedness was dealt with it will be realised how great ha s been the reduction in the charges on those loans actually involved. It has to be remembered, of course, that apart from the eligibility or otherwise of loans for conversion, many of the issues bear interest at such low rates that no saving could reasonably be effected. Practically eno-fourth of the debt domiciled in London, for instance, bears interest of under 4 per cent, over £30,000,000 returning investors only 3 per cent. On the other hand, some of the more recent loans were raised at rates of up to 6J per cent, nearly £44,000,000 carrying 6 per cent or more. It was here that the opportunity for readjustment was possible, and the Commonwealth is to be congratulated on the able manner in which it has taken advantage of the situation. There have been three primary reasons for the success of the operations. First, of course, is the renewed confidence of London investors as a result of the adherence to the Premiers’ plan and the unswerving determination of the Commonwealth to meet its external obligations. This is parr, of the reward Australians have received for the courageous sacrifices they liave maue in the national interests. The second factor was the low interest rates ruling in London, and in which Australia was granted special permission to participate. Thirdly, must be mentioned the extremely capable manner in which the negotiations have been handled by Mr. Bruce, whose special mission to London was to deal with these operations. It is significant that the latest conversion, involving a larger amount than any of its predecessors, is the most favorable of all, the effective rate being only £3 13s 7d per cent'. The first transaction, in October, 1932, although actually hearing a nominal rate of 3£ per cent, was issued at such a discount that the yield was £4 Is 2d per cent. The conversion of more than £11,000,000 was ( effected in May, 1933, at a rate of only £3 14s 5d per cent, but as this was only a short-dated loan it can hardly be compared with the others. In a major operation two months later the interest cost was £4 Is lOd per cent, and since then there has beer, a steady decline in the rate until last week’s issue was made at the lowest figure of all. From now on Australia will commence to reap the full benefit of her successful efforts to place her finances on a sound basis, and this, coupled with the great, improvement in economic conditions generally, should assist her rapid recovery. A ll ' interesting feature of the latest con-1 version is that it reveals the credit of Australia and New Zealand to be virtually on a par. In October last, the Dominion converted a £5,000,000 loan on terms that were identical with the latest Australian issue, but the fact that the term was a little shorter meant that tho yield to investors was ( £3 14s 3d, against Australia’s £3 13s 7d. It is unfortunate that New Zea-j land has not been in a better position to effect the conversion of more of her overseas loans on tho favorable terms now offering, but her opportunity will come within tho next few years. Apart from the £5,000,000 already referred to, the only loan that ' has reached the date of optional maturity is one of £4,000,000 which j tho Government is now awaiting an ’ opportunity to convert. Next year,* however, an issue of more than £lO,-* 000,000 will bo in a position > to be 1 dealt with, while another £6,000,000 j reaches tho optional date in 1936, and more than is due for redemption in 1939-40. There are noj other London loans, however, maturing within the near future. It has to he remembered, of course, that, generally speaking, New Zealand loans were not raised at tho same high interest rates as Australian ones, and, therefore, the savings which may be effoctcd will not bo so great. There is only one loan, for instance, at 6 per cent, the amount being under £6,000,000. Of the total debt of £161,400,000 domiciled in Lon-

don, only about £7,700,000 is at a rate in excess of 5 per cent, while more

than £42,000,000 carries 4 per cent or less. These figures, incidentally, reveal the favorable treatment which the Dominion has always received on the London market, and augur well for future prospects of sharing in the advantages of the easier conditions which are now ruling.