The Timaru Herald FRIDAY, APRIL 11, 1930. AUSTRALIA’S FINANCE.

Timaru Herald, Volume CXXV, Issue 18541, 11 April 1930, Page 8

The Timaru Herald FRIDAY, APRIL 11, 1930. AUSTRALIA’S FINANCE.

One slice of luck tliat has been enjoyed by Australia at a moment when the whole financial fabric of the Commonwealth showed signs of collapsing, is that no large loans redeemable overseas have to be met this year. Nevertheless, Commonwealth and State loans maturing in 1929 and 1930 totalled approximately £163,000,000. Of this large sum some £16,700,000 of State loans are due in London. This year, however, about £140,000,000 Australian loans mature. The operation of the national debt sinking fund somewhat reduced tb,e totals due in Australia, but the Commonwealth Treasury was faced with the conversion in Australia of £30,000,000 in 1929 and £110,000,000 due in 1930. The largest single amount is the Commonwealth 6 per cent, series of £62,000,000 maturing in December next. The Federal Treasurer (Mr Theodore) in a statement issued yesterday on the loan position, said that only £1S,()00,000 is yet required to meet the big loan obligations in December. “This is very gratifying,” said Mr Theodore, “as it provides a definite answer to the suggestion that Australia might have to seek oversea help.” In addition, as the official statement points out, Australia has covered the March conversion commitments, the loan issues being largely over subscribed. “Facts like these,” Mr Theodore observes, “must help to enhance the credit of Australia.” It is becoming more patent every day that the unpleasant experiences that the swing of the economic pendulum has inflicted on Australia, may yet prove blessings in disguise. For instance, the early withdrawal of the subscription lists in connection with the conversion loans, provided one of the best illustrations that could be given of the indisputable stability of the finances of the Commonwealth, notwithstanding the economic crisis through which the country is passing. The Age, discussing the financial situation, particularly in relation to loan redemptions, proudly points to the fact that already this year a loan of more than £10,000,000 has been converted in Australia, and the prospect of converting State loans due this year, which amount to nearly £40,000,000, is regarded as being favourable. If this is successfully accomplished, conversion operations in Australia will have amounted to £110,000,000 —probably a record total. In addition, new money, aggregating £20,000,000, portion of the amount sanctioned by the Federal Loan Council for State purposes, will he required, and every effort is being made by the Council to confine these borrowings to Australia. Six months ago doubts were expressed whether, in addition to the £105,000,000 loan which fell due on March 15th it would be possible to convert on reasonable terms the £60,000,000 loan which is not really due until December, but eight months before the due date the Treasurer announces that success is in sight. The prospect of raising in Australia the new money required by the States is therefore regarded as good. But Australia still has to face some fairly large financial transactions. The only issue falling due overseas is the Queensland loan of £3,781,720, which is repayable in London. The Commonwealth will also have to take up in London the Treasury Bills sold there last year, £5,000,000 being due in June and £5,000,000 in August. Apart from these commitments, which amount to approximately £13,750,000, it will not be necessary for the Commonwealth to go on to the London market unless it is decided to raise fresh money there to meet the annual interest bill of £30,000,000. It is not expected that there will he any difficulty in having the Queensland loan converted, and the Treasury bills renewed, and, doubtless, the continued shipment of gold to London by the Commonwealth Bank—a further £8,000,000 is now being sent —will assist in meeting the interest bill. The fact, however, that the raising of additional capital is not in question is the major favourable feature, but it remains to be seen if Australia can arrange the redemption of maturing loans of such large amounts on terms no less favourable to Australia than the issues handled in the transactions. Even one-quarter per cent, alteration in the average interest rate earned by conversion loans would mean an alteration of some £350,000 in the annual interest bill. No one has ever suggested, of course, that Australia, with her enormous recuperative powers cannot weather the storm, but the stabilising effect of the magnificent success of the Commonwealth’s loan redemption arrangements will he felt in New Zealand more particularly since a worldwide relaxation of credit is imminent, following on the reduction of bank rates in nearly every country.