BORROWING POLICY ATTACKED

Waikato Times, Volume 103, Issue 17409, 23 May 1928, Page 8

BORROWING POLICY ATTACKED

Addresssing delegates to the provincial conference of the New Zealand Farmers' Union this afternoon, Mr W. J. Poison, Dominion President, replied to recent statements made by the Minister of Finance and the secretary of the Reform League, and showed by quoting figures >that financially the country is in an alarming position. Mr Poison prefaced his remarks with a general review of the economic state of the Dominion. Comparing New Zealand to-day with what it was 20 years ago, he said then there was no unemployment, and prosperity was evident everywhere. The Government said to-day everything had changed, and it was no fair comparison. His point was that other Dominions had shown a trade revival, and as Mew Zealand was not a poor country, having over £900,000,000 nett wealth, 'there were-'no barriers to revival. What did Lhey find to-day? Government interference in business; public extravagance; banking monopoly; and mismanagement of immigration instead of serious aittempts 'to increase the population by the right type. There was increased taxation this year indirectly through the Customs, directly 'through adjustment in income tax, and directly through £750,000 in petrol revenue. In addition there were proposed loans of £7,000,000, £3,000,000 of which Jiad been raised. Mr Coates in a speech at the end of last year had stressed 'the necessity for economy. The finances of 'the country-failed to reveal any economy at.present. "I can see no indication of economy in public administration," Mr Poison continued. "Expenditure has been increased very materially. During the period since 'the war we have been increasing our national debt, that is, public debt, a't the rate of nearly a million a month. The interest rate is also increasing even more rapidly than the debt. The gross national debt on March 31, 1921, was £206,324,000. I have purposely used these figures, as the years 1910-20 were abnormal years.

"The secretary of the New Zealand Political Reform League, in what purported to be a reply'to me, accuses me of making use of the very figures I avoided using—a statement which I can only characterise as being deliberately incorrect. He accuses "Economist" in The Exporter of using the same figures'. Actually'the figures were made public, and he. must have seen them, knowing the statement was untrue." Increased Borrowing. The speaker then referred 'to a table showing the increase in borrowing. The total amount borrowed since the period mentioned was £44,680,000, bringing the debt lo £245.850,000 in 1927. Mr Poison also detailed local body debt., which had to be added, less the * amount borrowed by the local bodies from the Government. This in 1927 had reached the extraordinary total of £64,000,000.

"I disagree with Mr Stewart when he takes an extreme year, when borrowings for special reasons were £11,000,000, to show that the country's borrowings are steadily decreasing. There is no justification for basing comparisons on abnormal years of that kind. The total public national debt in 1927 amounted, to £310,000,000, and leaving out the proportion of public debt owing to the Government, exceeded £300,000,000. It is quite obvious that renewals of these loans must mean increased rate of interest, in spMc of the recentlymade boast about the success of''the last New Zealand loan." The New Loan. This loan Mr Poison described as "a fuss about -id." He called it this because the net yield to the investor on the issue price of £94 10s was £4 19s Bd, whereas in the case of the Commonwealth's last loan, more recently floated than New Znaland's, the net yield to the investors was £s—a, difference of 4d! The banking authorities of the work! showed that in the last few years all issues had participated in a general improvement—■ New Zealand among thorn. On this account the matter was one for congratulation. Loans Maturing. "In the next four years the Government is maturing £87,-175,000 worth of loans which will have to be renewed," the speaker added. "The average New Zealand interest rate, according to the Year Book, is 4.79 per cent. Many of these loans are cheaper money than -i.79 per cent. If they have to be renewed at anything approaching more than 5 per cent, it means increased interest charge for renewals alone in the next, four years of over £400,000. In addition, newloans estimated by the Government will mean another million in interest in the next, five years. It should be rightly understood that the country's interest bill must be enormously increased. The interest with which 1 am concerned is not the interest payable in the country, but abroad. Interest Sent Abroad. "Again I have been entirely misrepresented by the secretary of the Reform League. He says I have overlooked the fact that nearly half the interest on Government loans is paid to home investors. ' This is quite untrue. The interest debited to the bal-

MR POLSON REPLIES TO MINISTER. SPEECH TO - FARMERS' UNION. ENORMOUS INTEREST BURDEN. ACCUSES MINISTER OF INACCURACY.

ance of trade covers the interest of the Government and local body account paid abroad, together with the sum paid by the British Government in amortisation of the war account. "The interest in national local body and funded debt payable in 1927 was £7.26G,6G9, to which sum must be added the figures I have already given. I estimated in my former speeches the 'priva«j debts of this country abroad. The interest on these private debts—freight, insurance, and commission — I have to be added. In my speech at Masterton, lo which Mr James replied, I omitted these figures in order to deal entirely with official figures. I showed that- in seven years the exports amounted to £335,000,000. imports £317,000,000, and interest on public debt paid abroad £43,000,000, or a deficit on the balance of the amount of £25,000,000. I reiterated the statement that we were leaving out many millions, or more 'than our incomes, and borrowing £10,000,000 a year to keep up appearances." "Yet in reply to my statement the Reform Party spokesman makes the absurd statement that there is a-differ-ence of £59,000,000 between my Eltham and Masterton figures. Mr Stewart now says that loans come in as imports, and that my statement had no foundation in fact because I am not competent to distinguish between imports of capital and ordinary imports purchased out of national income. There are no imports of capital other 'than goods; therefore the fact is 'that we are buying imports on borrowed capital, which is the .worst form of extravagance. Whet Mr Stewart Said In 1928. "Curiously enough, in the Budget speech of 1925 Mr Stewart pro'tested against the very system which he so eloquently supports in 192'8. He said, 'I wish to emphasise again the danger of outside borrowing on a large scale while there are signs of an excess of imports, over exports which is insufficient to cover <|ur charges for interest payable overseas.' In another statement his colleague, Mr F. J. Rolleston, supported him. "In his speech in reply to me, Mr Stewart admitted our imports must pay for our exports, and should show sufficient surplus to. pay, also for our

oversea loans. This is just my point. Now he claims credit for import of capital without, debit for borrowing. This is most' extraordinary book-keep-ing for a Minister of Finance. It is a big somersault for a. statesman to make in one. year. In his Dunedin speech the Minister used a table showing .that, the 1904-1914 debt increase was £27,320.000 and the 1928 increase £3fi,900,000, and he ecfuates to pre-war value, showing the rate of interest not so great as pre-war. His' recent statements are as remarkable as his previous ones concerning the relation of imports to capital. In v the first place he compares a seven-year with a ten-year period. In the second place he omits over £20,000,000 accumulated surplus spent in another period. In the third place, he forgets lie borrowed 12s 6d worth, and must pay back £l, and suggests he borrowed £1 and need only pay back 12s od. Taking these figures into account, we And that the present borrowing rate of the country has enormously increased since the war. "In the reply of Mr James on behalf of the Government to my Masterton speech, it is stated that I ignored the fact that import values are loaded with 10 per cent. The loading is intended lo cover in part the cost of transport, freight, insurance, etc. Mr James is apparently under the impression that we cet our transport done for nothing. To eliminate it would falsify the flgurps, and, as a 'matter of fact, 10 cent is not nearly enough to cover the cliurces we are getting our goods for.

What Year Book Says. "In the 1924t-25 Year Book the Government Statistician gives an estimated balance-sheet of the debits and credits of New Zealand. There he estimates freight, insurance, and exchange at 20 per cent, of importsThe aggregate of imports from 1921 to 1927 was £317,000,000, of which 10 per cent, represents added loading for freight. This gives £28,8 7,000 as the added amount for freight over the period. If the basis adopted- bj he Government in this trade balance statement is correct, then the sum of £29 000,000 must be added to 'the imports to get the balance of freight charges for the period. This would make my figures all the more formidab"H would be interesting to know xvhv these statements from the \ear Sook were dropped after two year, is it because the Oovermnen has in it. or because the Minister oi s-trucieu , u ( nat Finance does not iu*.e u> = they noint to?" he concluded.