DOMINION’S PUBLIC DEBT.

Timaru Herald, Volume CXXV, Issue 17944, 1 May 1928, Page 7

DOMINION’S PUBLIC DEBT.

STATEAIENTS BY FINANCE AIINISTER. LESSENING THE DEAD WEIGHT. (Special to the “Herald.”) CAAIBRIDGE. April 30. Discussing the National Debt in relation to the burden of taxation borne by the people of New Zealand, *be Alinister of Finance in his address this evening, stated that the. Public Debt at the 31st Alarch last amounted tc £251,397,000, an increase of £5,546,000 fori tho yeTXx Although this was a large sum, a comparison with previous years showed that the Government’s policy, of tapering off in borrowing was beginning to show in a. marked manner. Two years ago the net increase in the Public Debt was £11,000,000. Last- year the net increase was approximately £7,000,000, so that the reduction this year to £5,546,000 was an indication of the results that mighthe achieved in a few years it the same policy is pursued. Ho hoped in time that the net increase in borrowing would fall to such a figure t-liat the amount of War Debt or other debt paid olf would equal. the new money borrowed for Public Works. The annual amount available for redemptions was steadily increasing each year, and in the last six years through this and cither means, the dead weight war debt had. been reduced by almost £lO,000,000. It was this practice of paving off an increased amount of debt each year which enabled the net borrowing each year, to show a dec, ease without any serious curtailment in the carrying to completion of liydro-elec-tric schemes and other Public Works. The new money borrowed during the year totalled £8,022,000, but against this redemptions of debt amounted to £2,476,000, leaving the net increase at £5,546,000, as already stated. _ The balance available io r the Public Works Fund, was increased by an amount of £250,000, transferred from the accumulated surpluses. THE BURDEN .OF TAXATION. Air Stewart said lie would like to refer to the annua] interest charges, and the statements constantly made about the burden of £10,000,000 a year, which assumes that New Zealand's debt is wholly unproductive. The position was set out in the 1927 Budget, wliich shows, that of. the gross amount paid for'interest in 1925-20. viz. £10,595,000, ..an amount of £3,546,000 was on account of the war debt* leaving £7,049,000 as the gross interest on the ordinary debt. Against this latter amount, however, recoveries from interest earning assets amounted to. £4,778,000. so that the interest burden on the taxpayer for the ordinary debt amounted to only £2,271,000, proving that this debt was productive to the extent of approximately 70 per cent. Tt was therefore quite wrong to st-,te that the gros9 interest charge of £10,000,000 is a burden on the taxpayer.

LONDON LO AN. “It is necessary,” the Alinister announced, “to have recourse to London for capital moneys, and negotiations are almost completed for an early loan issue. In the last three years respectively, we have borrowed in London £7,000,000, £6,000,000 ■ aud £6,000,000 but the issue this yfear for new money in that market will be. £5,000,000, that is, a reduction of £1)000,000. As is generally known, a very large amount, of our overseas debt matures in November, 1929 £29,000,000 at 4 per cent—and the best method of dealing with this large sum lias been under my close consideration for some time. It is desirable to "deal with as much as possible of this £29,000,000 before maturity rather than risk non-absorption and difficult terms for such a large sum in one redemption issue. LOCAL MATURING LOANS.

The wisdom of carefully guarding the surpluses of prosperous years to meet special circumstances, Air Stewart went on to say, was demonstrated by two important financial movements that occurred ■ during the year. In the first place, a local W.?.r Loan of £2,560,000 fed clue. This was the largest local loan that had fallen due at one date in New Zealand’s history. Under normal conditions this would linve occasioned no great strain on our resources. But the general position was disturbed hv the trading hanks raising their deposit rates in Alay last, and this had the obvious effect •of drawing from the Post Office many of the balances in its large accounts between £IOOO and £SOOO. The course of events in this connection afforded an excellent illustration of the- undesirability of continuing the holding in the Savings Bank of large sums at call, and which, as was shown, were feally trading balances on investment, and were not'savings of the neople. \s soon as these balaroe-- lm-1 reduced, lbs necessary steps were taken to terminate. the acceptanee by the Savings Bank of sums exceeding £2,000.