ECONOMIC CONDITIONS.

Taranaki Daily News, 19 November 1924, Page 5

ECONOMIC CONDITIONS.

SOME UNHEALTHY FACTORS. INSTABILITY OF BOOM PRICES. DEMAND CAUSING DEAR MONEY 7 . The economic conditions of New Zealand at the moment present some peculiar characteristics which are somewhat .unhealthy in their nature, says Sir Harold Beauchamp, formerly chairman of the Bank of New Zealand, in an article in the New Zealand Traveller. Never in the history of New Zealand have the values of our primary products been so high as they have been in recent years, and even to-day prices are at an altitude scarcely ever before attained. Wool, frozen meat, butter, cheese, tallow, pelts, hides, skins, and even gold are selling at extraordinarily high .prices. Sir Harold recalls the experience of the later war years and their sequel. ‘•The country was then affluent,” he says, “and the produ<_-rs literally had money to burn, and they set about binning it* Had the moratorium been lifted early in 1919, as it should have been, and as it was originally intended should be the case, mortgages would have been paid off. and most of the farmers in New Zealand would have enjoyed financial ease. But the moratorium continued, the borrowers were •protected, and rather than secure a release from their mortgages they sheltered behind the moratorium and plunged into land deals.” (Followed the “land mania" period, the boom in trade, and then the slump. UNPOPULARITY OF MORTGAGES. “Boom prices for our produce are again in evidence,” he continues, “and the farmers of the country, not strangled by heavy financial obligations, are once more enjoying financial ease, or should be so. Under the circumstances it is difficult to conceive that there can be any trouble in respect to t-he lifting of the moratorium. There are, of course, some men who have paid far -too much for their land, while others are holding more land than is warranted by the state of their finances. Such men naturally find the cover of the moratorium a comfortable protection, but are such men worth protecting Y Would it not be better for the community to have the inflation which these men represent squeezed out ? While ■this canker exists there can be no safety.

‘"lt can be stated as a .fact that every borrower on broad acres, on recent revaluation, who ha-s been able to show a fair margin for lending, had had no difficulty in renewing his mortgage, or obtaining a loan on reasonable terms. The unwarranted prolongation of the moratorium has caused advances on mortgage to become unpopular, and many investors who, under normal conditions. would have lent their money out on mortgage, are now investing in debentures and bonds, which are much more attractive than mortgages. Holders of debentures have a greater sense of security, because there is less chance of securities being prejudicially affected by the vagaries of politicians, many of whom appear to regard the mortgagee as enemies of the community or a sort of social pest.” NEW SITUATION DEVELOPING. Arising out of the economic mistakes of the past, a new financial situation is developing in the Dominion. Sir Harold Beauchamp describes how the Government and various State departments are drawing on the resources of the country. The Government has borrowed £1.125,000 in the Dominion at 5} per cent., and is offering 5J per cent, stock or bonds over the Treasury counter. The Post Office is offering five and ten years’ investment certificates, and the Public Trust Office is offering 5 per cent, fo’. deposits fixed for five years. “This takes us back to the war period, when the small man was urged to do his bit to help win the wav,” he remarks. “These demands are diverting funds from the ordinary financial institutions and rendering it very difficult for local bodies to sell their debentures. The result is that some financial institutions, to protect themselves, have been obliged to raise their rates for deposits, and now it is possible to obtain 5A per cent, for deposits fixed for two years. There is very keen competition for money on the part of the Treasury, the Public Trust Office, the Post Office, local bodies and financial institutions, and under this pressure the lending 'rates are advancing—that is, money is becoming dearer. Still, rates ruling in New Zealand are distinctly lower than those current in Australia. Our local bodies will probably have to drop out oft the market unless they can offer better rates of interest, say, at least 6 per cent., but as they cannot do this without Government authority, and there is little chance of there being obtained, their debentures will no doubt hang fire.” Touching on the exchange position, he remarks: “If imports expand there will be some relief, and if there is this expansion. an 4 borrowing in London is abandoned for a time, or materially reduced, the exchange problem would quii'kly right itself and cease to be a problem." A WORD OF WARNING. “The financial position, no doubt, dema mis our serious consideration." says Sir Harold in conclusion. “The country is heavily in debt. The gross public debt on March 31 last was £221,616.361, and since then the Government has borrowed £6,W>o,'ooo in London, besides the amount raised within the Dominion. The debt of the local bodies—now round about £40,000,000 —is increasing by leaps and bounds. The State alone has to pay annually for .interfest and sinking fund £10.665,608. .plus the interest on the loans raised during the past six -months. While produce prices remain high the burden will not be regarded as oppressive, but can we rely upon a continuation of high prices? Will not production be stimulated by the prevailing prices, and when our dairy farmers feel the competition of Argentina and Siberia. there will be cause for anxiety. For the present everything appears bright and promising, but, having regard the conditions to which I have

referred, I would strongly -suggest that all classes of the community would bo •prudent to make hay while the sun shines.”