AUSTRALIAN WAR LOAN

Dominion, Volume 9, Issue 2686, 4 February 1916, Page 4

AUSTRALIAN WAR LOAN

The Commonwealth Government has issued two war loans, and both have been extremely successful. The first loan, issued some months ago, while Me. Andbew Fisher was Prime Minister, was for £5,000,000, and the total amount subscribed was over £13,000,000, the whole of which the Government accepted. The second loan was for £10,000,000, and applications closed 011 Mouday last. The rate of interest on both loans is 4iper cent, per annum, and the issue price was par, that is to say, for every £100 bond the applicant had to pay the full £100. The last loan was issued on popular terms, the Government accepting £10 or any multiple thereof, without any limit as to amount According to a message we publish this morning, this second loan of £10,000,000 has been subscribed two-fold, the amount applied for being £20,273,000, the whole of which the Government has accepted. Thus for" war purposes the Commonwealth Government has raised over £'33,000,000, relieving the Imperial Government to that extent. Apart from the succcss of the, two issues, the Government has done exceedingly well in floating the loans at par on a per cent, basis, for it would bp impossible just, now to raise money 111 London under a per cent. The New South Wales State Government recently placed a loan for £2,000,000 at 5 per cent-., and although it was offered at a discount, the public response was very poor, the underwriters being saddled with <0 per cent, of the amount. Since

the Committee of the London Stock Exchange released jobbers and brokers from observing the minimum price rule, colonial Government securities quoted on the Exchange have depreciated very considerably. I'liccs have been adjusted to the changed conditions, and investors now expect these securities to yield them from oh to s:j per cent. And tlii;. seems fair enough, as five-year Exchequer bonds boa-ring interest at 5 per cent, are obtainable over the counter at the Treasury. As a matUfr of fact, the British war expenditure is being met largely by this means.

It is obvious that for some time io come colonial Governments will find it difficult to raise money in London under 5 per cent., probably it will cost more, and as for municipalities and Harbour Boards, their rate will probably approximate to 6 per cent. This, of course, will mean that efforts must be made to abstain as much as possible from borrowing in London, but the trouble will be when maturing loans have to be faced. It is hardly likely that holders of colonial stock will be content to renew; at or 4 per cent. The alternative is to borrow locally, and while this is ■ possible just now% owing to the enormous trade balance, the position would be quite different after the close of the war. The Governments in Australasia will probably be forced to borrow in London at whatever rate may be offering to provide for maturing loans, but care will have to be taken fv> greatly modify new demands. The whole point is that there has got to be a readjustment of sentiments and ideas to conform with the new conditions.