DOMINION’S FINANCES.

Southland Times, Issue 14635, 27 January 1911, Page 5

DOMINION’S FINANCES.

REVIEW BV THE PRIME MINISTER FLOTATION OF £5,000,000. CRITICS ANSWERED. (Special to the Times.) STRATFORD, Jan. 26. “We are to-day in a distinctly strong position financially, and I think I can claim without egotism that I have always kept the financial condition very sound indeed.” This was the keynote of the most important portion of the speech delivered here to-night by the Prime Minister, Sir Joseph Ward, before an audience which filled the Town Hall in all parts. Sir Joseph dealt with financial matters at considerable, length, and made special reference to the flotation of the five million loan. The Prime Minister recalled the recent announcement that for the nine months ending December 31 last the revenue of the Dominion had increased by £703,272 in comparison with the corresponding period of 1909, and that the revenue for the year showed an increase of £848,923. The actual ordinary revenue (including territorial revenue) received for the nine months was £7,148,582, while the expenditure for the Consolidated Fund was £4.034.971, and for the Public Works Fund £1,281,297. This brought him to the question of ways and means, especially the question of borrowing. The Plvs Million Loan.

Quite recently a loan of £5.000,000 had been floated, and he wished to direct special attention to the manner in which the money was apportioned. It was as follows: —Naval defence account, £1,250,000, and to public works and land settlement account, £1,750,000; advances to settlers, £1,675,000; advances to workers, £325,000. Those critics who had been busily attempting to discount the flotation of the loan and those who were declaring that it had resulted in the credit of the Dominion being injured, though no newspaper or public man in England had made any such statement, might rightly be asked what portion of the five millions they would have omitted. Had there been any talk of omitting the £1,250,000 raised to strengthen the navy, people would have held up their hands in holy horror. The Leader of the Opposition and his party had regularly voted for the general loans, and so, of course, could not consistently object to the item of £1,750,000. It would also be interesting to know who would have liked to strike out the item for the Advances Departments which did guch an enormous amount of good to the country directly or indirectly. He thought he would be pretty safe in answering the question himself by saying that it was nothing more or less than pure political hypocricy to suggest that any portion of the five millions was not essential for the purpose for which Parliament set it aside. Flotation of the Loan. The responsibility for the flotation of the loan, it was quite true, rested upon his shoulders, but the veriest tyro in finance must recognise that he had to be guided by those whom the Government trusted in England to advise them, and who recommended the time at which the loan should be put upon the market. It was indeed regrettable in the interests of the Dominion that the policy of the Opposition for many years past had been to try to gain office by deliberately discounting the financial position. He would draw attention to the fact that of the £1,850,000 loan issued by New Zealand on March 31st, 1910, the issue being upon almost similar terms to those of the £5,000,000 loan, the underwriters were required to take only 17 per cent. Two months earlier, in January, an Indian 3Vz per cent, loan of £700,000 at £96 resulted in the underwriters having to take 50 per cent., while in the case of a Ceylon 3% per cent, loan issued in December, 1909, at £96 10s the underwriters had to take 90 per cent. It would thus be seen that within a few months of the issue of the loan referred to New Zealand came out splendidly in comparison with other countries, and yet some critics had done nothing else but perform against the issue. Half of the £1,850,000 loan was converted within a fortnight. The latest advice from London was that £1,601,800 of it had been converted to the date of writing. It was not many years since when they and other countries would have been required to pay 4 per cent, with a considerable discount as well as an underwriting fee to have got such a loan off at all. The £5,000,000 loan was issued on November 11th, and closed on the 16th, the time being fixed by the representatives of the underwriters. The conditions as to the conversion, etc., were quite common ones. The agreement that the loan should be floated by the underwriters at one per cent., was implicitly carried out, and, to show the value of some of the criticisms passed upon the transactions, the latest advice from the High Commissioner intimated that, although half of the loan remained in the hands of the underwriters, who were holding it voluntarily for investment up to December 21st, £760,200 of the loan should be converted, and the conversions were still proceeding. Further intimation was to the effect that some of the underwriters had earned a profit upon the portions of the loan that had to be sold to the public. A Nut to Crack. Here was a little nut for so-called financial critics to crack. A Strait Settlement loan of £2,750,000 at 3% per cent was issued at £95 10s, and. though a month before the new year issue of it the underwriters had to take 93 per cent., nobody heard of the Leader of the British Opposition saying that the credit of the country, in which the credit of Britain was also involved, was discredited. There were loans giving a wider margin of profit to investors than the New Zealand loan, and where the underwriters had taken the greater proportion; but one never heard cries of stinking fish and declarations of impending ruin in order to make political capital. In the case of New Zealand there was absolutely nothing whatever to justify the pessimistic, condemnatory speeches and articles which had been made and written. English Opinions.

As far as he had been able to see there had been no statement published in England regarding the discredit the loan was supposed to have brought to New Zealand. Some of the underwriters who had taken the loan up had found fault with the stability of the country, and no paper seemed to have questioned the financial position of New Zealand. The Leader of the Opposition and his supporters had quoted isolated sentences from Home papers, suggesting that the credit of New Zealand had been seriously shaken, and it was only a matter of fairness that he himself should give some of the statements he had found and which evinced the utmost confidence in the position. The papers he had seen all said that the position was excellent, and that the financial stability of the Dominion was undoubted. None appeared to have done other than say that New Zealand was most successful in obtaining its £5,000,000 loan from the underwriters by paying only one per cent, commission, and that it was beyond question that the causes which led to the public not realising the underwriters were not connected with the credit of New Zealand at all. They said it was largely due to the operations of large investors, who wanted the stock to hold for investment who came in as underwriters, and consequently did not require to go upon the open market. None had attributed it to default on part of the Government. It had been left to political opponents here to do that. The Borrowing Question.

Speaking on financial matters generally, the Premier said he was of the opinion that we could not do without borrowing just yet. It could, of course, be done without easily enough: but it would involve either the abandonment of the present policy of development or the taking of steps to provide for our public works expenditure by imposing fresh taxation to the extent of £1,500.000 or £2,000,000 per annum. The proper and wisest policy was to borrow what was reasonably required for development purposes and spread the repayment over two or three generations. The present generation should not have to pay for all requirements in the way of roads, bridges, telegraph lines and so on, and hand them on free of all liability to its successors; neither should the liability be passed on with accumulation to the third generation from now; but each

should pay its share toward what was being done for the permanent benefit of the country. A Dire Result. If we were to discontinue borrowing altogether and yet at the same time were unwilling to carry on development by taxation, what would be the result? It could only be a state of stagnation. Land would be unroaded, rivers unhridged, and settlers vainly yearning for home. Within the next few years thousands of settlers must be given roads, bridges, telephones and so on, and for 15 or 20 years to come railway and other development must continue to take place. The Australian States were borrowing to develop their natural resources, and if New Zealand did not continue to follow its present policy it would be left in the race. It would lose the most valuable members of its population, as it had done in the early eighties. Anyone who took a practical view of the position must come to the conclusion that there was an enormous amount of work still to be done during the next two decades. Activity in Advances. The Advances to Settlers and Workers Offices were now well in funds and during the past year had let £1,329,000 to settlers and £IOB,OOO to workers. Since the inception of the system the department had lent £10.254,000 to settlers altogether, and £1,152,000 to workers. The full amount of £3OOO was now being lent on country properties, and at the last meeting of the Board on Tuesday it had been decided to raise the limit for town properties to £2OOO. Within a few days complete specimen plans and specifications for workers’ homes would be issued free of charge. There were IS different types planned, the cost varying from £IOO to £750 according to size. This would do very much to improve the type of workers’ home, and at the same time would give the department better security for its loans. In connection with loans to local bodies £195,000 was the amount dealt with at the last meeting of the Board, while the total amount sp lent since the Department started had been £1,552,190.

(Sir Joseph also touched on a number of other subjects. His remarks are reported under separate headings..—Ed. S.T.)