TIGHT MONEY.

Dominion, Volume 5, Issue 1389, 15 March 1912, Page 6

TIGHT MONEY.

AND THE UNDERLYING CAUSES,

BORROWING AND WASTE,

Although the tightness of money has not been commented upon to the same extent here as in other parts of the Dominion, it is a trouble from which Wellington is by no means free nt tho prosent time. It was ascertained nn different quarters yesUrday that investors aro demanding one per cent, more for money invested on mortgago than they were content to accept at this time last year. Five and a half per cent, is said to bo the ruling rate, and, so far as can bo learned, none of the companies which have funds to invest are willing to accept less. A commercial man, who ds connected with investment companies and is well versed in the financial affairs of the Dominion, supplied a reporter yesterday with an interesting explanation of the present financial condition. In tho first place, he endorsed the statement made in other quarters, that investing companies were getting a rate of interest better, by one per cent., than they could get at this time last year. "There is no doubt," he remarked, "that money is scarcer. I don't think that tho demand for loans has grown much, or that applications are any more numerous than they were at this time last year. The tightness of money arises from the difficulty experienced in meeting interest payments in London. I don't think that" the money market will improve until next year's wool clip has Come forward. Our principal exports, wool, meat, butter, and tallow continue to command a good price, but those exports do not keep pace with our borrowings from Great Bnitain. Interest has been moro or less paid out of loans for some time past, and last year (to December, 1911), tho imports of tho Dominion exceeded its exports. This leaves no alternative but to pay interest out of loan moneys. If we cannot export sufficient in goods" to cover interest payments wo can provide the necessary funds only by raising a loan in London. ".Most of tho capital sunk in this country." ho continued, "is borrowed from oiitsido sources, and consequently a great deal of interest has to be sent out of New Zealand. As regards the public debt alone, if wo export goods to the value of Xlfi,oUo,ooo per annum, our imports should be less by something like two millions in order to make provision for interest payments. But, in addition, interest payments have to be met in respect of municipal and local body borrowing, and to an extent less easily dofined, in respect of private borrowing as well. "There is only ono remedy for the present state of affairs," continued our informant, "and that is to go slow and stop wasteful expenditure. Of the latter we have a shining in the duplication of the railway and improvement of tho road to Lower Hutt. This work cost over .£300,000, whereas everything necessary might have been done for £50,000. Tho Government, in carrying out the work, adopted methods worthy of the ancient Britons. They tackled it with wheelbarrows and shovels, instead of using modern appliances. Similar things might be said of a great many moro Government operations. Sido by side with wasto of this character thero has been reckless plunging. For instance, the Government is lending more in advances to settlers on Waikato holdings than tho lands could have been bought for five years ago. On this same land from 10s. to 15s. per acre has to bo expended annually for superphosphates and other manures, iu order to maintain it in a state fit to grow anything. This country is all right, but it is being grossly mismanaged, particularly in regard to its financial affairs. If a business man were employed to run it on business lines, ho could sot it on the highroad of prosperity in a very short time, but a wasteful plunging Government will only run it deeper into tho miro of financial difficulties." Concluding his observations, our informant ventured tho opinion that a good spring might induce a perceptible improvement in tho state of tho local money market. The country would then bo in possession of its incomo from exports of butter, wool, meat, etc., and consequently in a position to meet its engagements. At present, in the fall of the year, and with winter coming on, no immediate improvement was to bo looked for. The only way to secure a permanent release from financial troubles was to sit still and go quietly, to reduce borrowing to a minimum, and demand a good return for every shilling of public or private money invested. No country could long endure the investment of capital, public or private, at ruinously low rates of interest.

The various factors governing the state of tho local money market have (says the current "Tratlo Review") lately been working iip a decidedly tinner condition of affair?. Firstly, our imports have grown to a higher level than ever before, and are in excess of the consuming power of the community, which has resulted in an accumulation "of stocks in several quarters, arid a consequent locking up of tho capital thus represented, and a reduction in the scale of importation is much needed. Oil the other hand, the current export season is not coming up to the level of the previous two, and our exports are only slightly in'excess of tho imports. The opening up of fresh land for cultivation and the sub-division of some of the larger estates, have made some fairly heavy calls for capital for improvements, etc., and it must be remembered, in this connection, that a proportion of our imports are used in this direction and thus form an addition to the capital of the country. The recent slump in Waihi shares means a serious loss to the country—the depreciation in the capital value of these shares held in the Dominion must bo nearly two millions, while the loss of revenue from dividends is something like ,£150,000 per annum. These factors all have their eftect on the money market and have firmed up the value of money. Loan rates for mortgages bavb been raised about half to one per cent, on the rates ruling a few months ago. A degree of caution and restriction of imports, however, would effect a considerable improvement and we do not anticipate any serious or lasting results from the present state of affairs.