The Daily News THURSDAY, AUGUST 16, 1934. STATE ADVANCES.

Taranaki Daily News, 16 August 1934, Page 4

The Daily News

THURSDAY, AUGUST 16, 1934. STATE ADVANCES.

OFFICES: NEW PLYMOUTH, Corrie Street. STRATFORD, Broadway. HAWERA. High Street

The report of the State Advances Office for the past financial year gives food for much consideration. The policy of providing cheap money for small settlers and for workers’ homes was acclaimed by politicians of every party as a beneficent development of the State’s privileges or duties. The policy is now being tested in a manner in which even the most cautious of its supporters could scarcely have anticipated. Nor is it possible to see the end of the story. It is true that in last year’s report the department records that the total losses incurred since the inauguration of State advances have been but £785,563. This, in an aggregate of loans totalling £75,000,000, is a loss of under one per cent., and we.re these the only losses experienced or anticipated the Dominion might congratulate itself upon the successful issue of a social experiment. Unfortunately, as the report states, the amount written off does not include losses ‘‘which may in fact exist, but are not definitely ascertainable until securities are realised.” The narrow margin of security accepted for loans seemed satisfactory so long as the “workers” to whom they were granted were able to earn wages approximating those they. were receiving when the loans were granted, but since wages have fallen, and in some cases only relief pay been earnable; payments of principal and interest have fallen off, and the margin of security seems bound to prove insufficient to prevent considerable losses in the future. The same conditions apply to the advances made on small farms. Most of these were dairy farms from which the revenue has been halved by the fall in prices, while costs of production have not fallen to anything like the same extent. During the past year nearly half the ten thousand settlers engaged in dairy farming failed to meet their commitments, and unless prices improve there seems little chance of the payments being overtaken. The policy of State advances was deliberately framed to assist the man of small means and the department has therefore not received much benefit from the rise in prices for wool. It is satisfactory to note, however, that where returns were expanded by the increased prices obtainable mortgagors have reduced their mortgage arrears as much as possible, an indication that the farming community is willing to meet its commitments whenever circumstances will allow it to do so. That is the justification for the sympathetic ' treatment the department is according to borrowers. It is recognised that the average small farmer has no reserves, that he must depend upon the earnings from his holding to meet the annual charges, and that if those earnings are reduced through no fault of the producer he must be given assistance to weather the financial storm. At the same time, when advances on this class of security total £42,000,000 anxiety in regard to the future cannot be avoided. There is the further possibility, referred to recently by Mr. H. G. Dickie, M.P., of the State Advances Office losing its best assets as a result of its loans being paid off with money borrowed at a lower rate of interest. It is only the best class of property that can show the margin of security likely, to attract a lender at lower rates of interest, and it is from such properties that the State Advances Office has least anxiety in obtaining payment of the annual charges. The question is whether the department will be able to keep its long-term loans at the present rate of interest. The rates were reasonable when they were made, and were based upon the cost of money borrowed by the State to provide the department with funds. Now that the market rate for money has fallen the position is altered considerably for the man who has the security to offer. The department appears to be endeavouring to nurse many of its borrowers back to financial recovery, but how far success will attend its efforts will depend upon many other factors than the State Advances Office can control.