THE Wairarapa Age MORNING DAILY.- WEDNESDAY, NOVEMBER 5, 1930. OUR LOAD OF LOANS.

Wairarapa Age, 5 November 1930, Page 4

THE Wairarapa Age MORNING DAILY.WEDNESDAY, NOVEMBER 5, 1930. OUR LOAD OF LOANS.

Some timely observations on a very important branch of national financial administration—the -management of the public 'debt—are made by the Hon, W, Downie Stewart, who was Minister of Finance in the Reform Government, in an article in the “Now Zealand Financial Tinies, ” a new puhlipfitimi of which the first number has just been published in Wellington. Mr. Stewart reviews I lie roeent history of State borrowing in tliiH country in a particularly interesting way. He shoVs that the Reform Barty had. adopted a policy of tapering off borrowing and under it had reduced the national borrowing in I.on'don from 7 'millions sterling in 1925 to 5 millions in 1925, This policy was thrown to the winds when the United Pa.rty took office to the inspiring strains of the late Sir Joseph Ward’s seventy million programme and though economic circumstances speedily compelled the United Government to modify its boom policy proposals, the net increase in the public debt (external and local borrowing) rose from £5,545,363 in 1927-28 (the last complete year of Reform) to over 7 millions in 1928-29 an’d over 8 J millions in 1929-30.

Nothing can be more certain than that this lavish increase in borrowing, in itself and on account of the unprofitable objects, such as non-paying railways, to which it has been allocated, has added heavily to the financial difficulties under which the Dominion is at present labouring. In the article mentioned, Mr. Stewart sets out some of the reasons which induced him to restrict an’d reduce borrowing. These reasons were in brief: A fall in world prices was expected which would take more cf our exports to meet our debt charges and at the game time would

reduce the taxable capacity of the country; the London market appeared to be growing uneasy at the heavy borrowing of the Dominions and British economists were beginning to question the privilege the Dominions k enjoyed in having their loans treated ;as trustee securities; it was obvious that the post-war immigration policy must be suspended and. that the weight of an increasing public debt would be felt more than if the population were being enlarged by immigration. As affairs have developed, it is manifest that the Reform Government acted with sound wigdom and foresight in reducing borrowing up to 1927-28 and preparing to reduce it further as time went on. The same facts demonstrate the stupidity of the boi rowing policy the United Party proposed to carry out an'd has carried out in part

The big fact by which we are faced to day is the fall in world prices and the improbability that they will rise to any material extent for a long time to come. External debt that could 1 ave been borne comfortably in easier years of higher world prices becomes in these circumstances an almost intolerable burden. In view of the increased calls made upon our exports to meet debt charges and the sviious depletion of the Dominion’s taxable resources, the only course wjrch considering is to hark back to the policy instituted by the Reform Government. The policy was not merely one of tapering off new borrowing. Mr. Stewart points out that the total amount available for debt repayment last year was about 2$ millions and that the amount is increasing annually. He was in hopes that it would rot be many years before the <>f annual debt repayment and the amount of new borrowing in JLondon would coincide. His answer to a question as to what sense there is in paying off debt and borrowing at the same time is that the debt fcaid off is usually deadweight debt, such as war debt, which is a direct burden on the taxpayer, while the new debt is, or should be, for productive purposes, and therefore not d burden on the taxpayer. It has to be a’dded to what Mr. Stewart has said that much of our debt that is called productive is so only in name. For instance, anyone who paicl for our State railways the 57 millions sterling at which they stand in the national accounts would make a very bad bargain, There is no doubt, however, that a rigid restriction of new borrowing to the lowest possible amount and to genuinely reproductive works, in conjunction with the existing arrangements for debt repayment, would immensely strengthen and improve the financial position of the Dominion in the comparatively near future. The United Party can only adopt this fcound and wise policy by repudiating its election promises and proposals, but the utterances of some of its own Ministers may be cite'd as evidence than no other policy will meet the needs of the Dominion and safeguard Jdts interests.