PUBLIC DEBT

Wanganui Chronicle, Volume 73, Issue 97, 26 April 1930, Page 9

PUBLIC DEBT

TOTAL NOW £267,380,000 BIG CONVERSION TRANSACTION HIGH INTEREST RATES [ Per Press Association. ) T ROTORUA, April 24. *The Public Debt on March 31 last amounted to approximately £267,380,000, states Sir Joseph Ward. The figures again being provisional and subject to audit. This is a net increase of £3,190,000 for the year. It may be explained, howevei, that this unusually small increase was due to the fact that £5,380,000 of the new loan moneys raised in the previous financial year, being part of the £7,000,000 London Loan raised in January 1929 was really part of this year’s finance. The new loan moneys received during 1929-30 totalled approximately £5,7000,000; including £1,620,000 in London, being the last instalment of the £7,000,000 loan of January 1929 and £4,080,000 obtained from local issues. As a partial set off against those new issues, there were redemptions of debt during the year amounting t 0 about £2,510,000 leaving the net increase at £3,190,000. As already stated, of the redemptioni some £406,000 represented funded debt payments to the British Government and £1,160,000, the operations under the statutory debt repayment scheme, while £260,000 came from reparations, and the balance from other accounts.

The most important debt operation during the year was the satisfactory arrangements made for dealing with the balance of the 4 per cent New Zealand consolidated stock which was due on November 1, 1929. On April 1, 1929 there was still £11,274,000 of this stock in the hands of the public; a further conversion offer t 0 convert up to £5,000,000 of 4 per cent 1929 stock into 5 per cent stock, at par, to mature July 1, 1945 (with an option to the Government to redeem on or after July 1, 1935) together with a cash payment of £2 per cent on November 1 was made to holders of the old stock. In September, 1929, this offer was underwritten, and was taken up by the holders to the extent of £3,628,000. In view of Hie fact that the London money market at that time was seriously disturbed by the reactions from the boom on the New York Stock Exchange, coupled with the Hatry affair, and thl outflow of gold to the European market, the Dominion was fortunate in placing the stock on these terms, which were favourably commented upon by London financial papers. The remaining £6,274,000 of 1929 stock was either purchased before maturity, or repaid at maturity. The necessary funds for these operations were provided from New Zealand, £672,000 being provided out of debt repayment moneys, and the balance from the proceeds of local issues in redemption. The conversion and redemption of the £29,490,000 of 4 per cent consolidated stock was the largest and most important financial operation in the Dominion’s experience, and when it is remembered that it had to be largely carried out over a period when the London money market was adversely affected by international complications it will be realised that the Dominion is to be congratulated on the successful termination of these largo operations. It may be added that the transaction resulted in approximately £1,170,000 of the debt being repaid and in about £6,000,000 of debt being transferred from London to New Zealand, which fact is of considerable significance economically.

Interest Rates. While dealing with the public debt, I would like to refer briefly to the rice in the interest rates at which local issuo are made. The rate was increased from 5 1-8 per cent to 5| on January 9, 1930 and I have received many protests against the action taken in thii connection. I need hardly say that the Government is desirous of obtainmg as cheaply as possible the necessary capital for carrying out its policy in connection with public works, land settlement, state advances, etc. It was found, however, that as a result of the high rates offered in Australia, and the relative scarcity of capital, that the amount required by the Government could not be obtained at the rates previously offered. The local requirements of the Government were also affected by the large sums it was found advisable to provide for tho redemptions of 4 per cent consolidated stock already referred to. The Government cannot control the price of money, any more than it can control the price of butter, or any other commodity for which there is a world wide market. The Government in order to carry on its programme, approved by Parliament, thus had no option but to increase the rate of interest on debentures and inscribed stock issued in New Zealand.

Loans Falling Doa. The loans falling due in New Zsw> land during the current financial year include the following amount held by the public: £1,041,680 bearing interest at 51 per cent, due on July 1, next) £326,900 bearing interest at 5 per eenc, due on July 15 next; £4,887,840 bearin< interest at 44 per cent due on September 1 next. In regard to the first two loans I have to announce that holders of the securities will be offered renewal for a further period, from the respective maturity dates to February 15, 1937 with interest at 5$ per cent payable on August 15 and February 15. Holders of inscribed stock will shortly be communicated with direct from the treasury and applications for renewal of this form of security as well as bearer debentures on issue in respect of these loans may be made at the offices of the Treasury at Auckland, Wellington, Christchurch and Dunedin, or at any branch of the Bank of New Zealand in the Dominion. The terms to be offered to the holders of securities in the £4,887,840 4} per cent loan will bo announced later.