£13,000,000 LOAN

Te Awamutu Courier, Volume 53, Issue 3822, 16 October 1936, Page 7

£13,000,000 LOAN

HOW IS THE MONEY TO BE RAISED? “A FEELING OF UNREST.” “The decision of the Government to secure powers to raise £13,000,000 has surprised the business community and caused a feeling of unrest in financial circles,” said Mr J. T. Martin at a meeting of the Wellington Chamber of Commerce last Tuesday night. New Zealand’s public indebtedness already ranked high, being £lB2 per head, and was now with Australia the highest of any country in the world, said Mr Martin. New Zealand’s taxation from all sources for 1935-36 was £21,500,000, against an expenditure of £29,000,000, whereas the estimated taxation for 1936-37 was £26,000,000 and the expenditure £31,000,COG. Pensions had increased from £2,750,000 in 1928-29 to £5,500,000. “This huge expenditure of public funds demands investigation by the mercantile community, as it is on their shoulders the heavy burden of taxation falls,” said Mr Martin. “Mercantile and financial institutions and land and property owners, on whom lhe Government is largely dependent for income, have to-day no consultative voice in Government financial circles: they count for less than the workers who contribute nothing or very little to income taxation.” The borrowing of £13,000,000 in the first year of office suggested a continuative borrowing policy which might ultimately drain our surplus invest ment funds and thereby stultify the natural progress and development of the farming lands, and the industry of the country, Mr Martin said. It was not. practicable to float a fresh New Zealand loan on the London market, as the Home Government was not issuing fresh loans to any Dominion, though willing to renew maturing loans. The New Zealand Government therefore had no alternative but to raise the loans locally. It could enforce loans from institutions under its control, such as the Savings Bank, State Fire Insurance and Public Trust. It could also offer to borrow from the leading insurance companies in the country at ruling rates, and having exhausted those sources, it appeared that it w'ould then rely on the Reserve Bank for the balance. t NO COSTLESS CREDIT YET. “It will be interesting to know just what amount will be drawn from the Reserve Bank,” added Mr Martin. “There is this satisfaction, however, that there is no introduction into the programme of any suggestion oC cost less credit, for which we are all thankful. The little information we are given and as far as we can gather from the Minister’s enigmatical statement is in keeping with orthodox financing.” Mr W. S. Cederholm said that apparently the Reserve Bank was going to advance the money. The asset would be created by imposing further taxation on the business community and the people generally. The chairman, Mr C. J. B. Norwood, said that Mr Nash was reported to have stated, at Auckland, that interest would be paid on all money borrowed. That assurance must have been received with relief throughout the community. Mr M. G. C. McCaul said there was much that was not clear. It was not clear how the money was to be raised, tut a study of the Finance Bill showed that provision had been made to absorb funds held by' various Government departments. The departments were empowered to borrow, if they wished, from the Reserve Bank, so there was a possibility of portion of the money coming back to the bank in the end. The Minister had taken power to fix the rate of interest, but that was only following the usual practice. It was not for them to sup pose, without due evidence to the contrary, that he would fix it at a rate that was not the market rate. HAMPERING- PRIVATE INDUSTRY. Mr McCaul, in referring to the Government’s programme of works, said that by drawing on legitimate labour supplies it would hamper private industry. What was going to happen when the public works scheme came to an end? Would another £13,000,000 be borrowed to keep the men in employment oi would they be thrown on to the labour market? The enormous expenditure now going on in England bad resulted in big money coming to New Zealand through the ability ol the working people in the Old Country to purchase out primary products “We are enjoying a mild boom," said Mr McCaul, “and our Government is turning a mild boom into a highly dangerous boom that will react disastrously to us. The Government claims the depressions can be avoided. The Government can no more avoid depressions than a certain King of England could stop the tide coming in." Mr Cederholm said that the Government's financial plan was social credit in disguise. It was going to borrow from the Reserve Bank in anticipation of the money being taken out oi the pocket of the taxpayer. Mr R. H. Nimmo said he was positively alarmed at some of the schemes on which the Government proposed to spend large sums ot money. He was literally staggered to find that it was intended to spend no less than half a million pounds on a two miles and a half deviation in the Taranaki dis trict. He considered that the highlight of Government extravagance. After further discussion it was decided to support tho representations made by the Associated Chambers of Commerce against the enormous expenditure foreshadowed in the Finance Bill.