PUBLIC DEBT

Evening Post, Volume CXXIII, Issue 124, 27 May 1937, Page 10

PUBLIC DEBT

HOW IT HAS GROWN

A STORY IN FIGURES

FOUR PERIODS

There is a story behind the Public j Debt of New Zealand. To the average person figures are so dull that they are mostly left to the tender mercy of politicians who know how to make the best of them. At the same time there are some figures which provide a most interesting source of study, and into this category fall the statistics relating to State indebtedness, as. set out in the Year Book. The Year Book will never be a best-seller, and the Government Statistician, who is charged with its compilation, will never be accused of pandering to popular tastes, but in the 1937 edition, that important official, whether unconsciously or not, has—admittedly in somewhat prosaic language—told an interesting story of New Zealand's development over the years. He has done it by reciting plain facts about the Public Debt. For the purposes of his summary, the Government Statistician has divided the history of the Public Debt into four distinct periods. They are: (1) Up to the end of the financial year 1890-91; (2) from April 1, 1891, to March 31, 1914; (3) from April 1, 1914, to March 31, 1920; and (4) from April 1, 1920, to date. Briefly, but succinctly, he explains why those periods have been chosen. HOW IT STARTED. Up to March 31, 1891, he points out, loan expenditure had been chiefly concerned with railways and roads, the i taking over of the loan liabilities of the Provincial Governments on their abolition, and the Maori War. That period marked the beginning of things in New Zealand; when the people were more or less feeling their way and making the country of their adoption at least habitable. They were concerned more with necessities than amenities. But even the provision of necessities cost money, and at the end of the p first period mentioned by the Government Statistician New Zealand found itself with a Public Debt of no less than £38,830,350. During the next period—lß9l to 1914—the functions of the State were widely extended, and the Public Debt more than doubled itself. Financial assistance was provided' for settlers, for workers, and for local bodies, alienated lands were repurchased, the coal-mining industry was developed, the provision of hydro-electric power, became an accomplished fact, and the State entered the field of business, notably fire and accident insurance. So, by March, 1914, the National Debt had grown to £94,753,827. AFTEKMATH OF WAR. For a young country the load of debt was a,staggering one, but there was worse to come. During the next six years—the third period : covered by the Government Statistician—New Zealand increased her debt by no less a sum than £ 106,416,928, but for once the politicians were .not to blame. The prosecution of the Great War and the many problems arising from it were almost entirely responsible for the tremendous advance, for during the war years normal State activities were practically at a standstill. The Government Statistician brings what might be called the war period to a close on March 31, 1920, and at that date New Zealand was carrying a debt of £201,170,755, or £162 12s 9d per head of population. During the next sixteen years, to March 31, 1936, the loan burden increased by £81,390,343, and today the debt stands at £282,561,098. or £179 10s 6d per head. How has all- this money been expended? The answer is interesting. War and defence account for £70,330,860; ' railways, £60,947,861; State advances, £37,722,474; land settlement and improvement, £29,439,602; roads and highways, £27,922,257; hydro-electric schemes, £12,159,512; post and telegraphs, £13,486,190; and public buildings, schools, and sites, £13,447,716. There are numerous small items of which not the least interesting is old provincial liabilities of £878,739. Practically the whole of New Zealand's debt is domiciled in London and New Zealand. Of the total £158,711.930, or 56.17 per cent., is held in London; £122,256,518,' or 43.27 per cent., in New Zealand; and £1.592,650. or 0.56 per cent., in Australia. Between March, 1914, and March 31, 1936, the amount domiciled in London increased from £78,500,000 to £159,000,000, and that domiciled in New vZealand from £17,000,000 .to £122,000,000. CHANGING THE DOMICILE,. The taxpayer will naturally want'to know what the Government is going to do about the enormous load of debt which the country is carrying. Is anything to be done to reduce the load? <Past history does not justify much optimism. On only three occasions in the history of New Zealand has a reduction in the gross public debt been effected during the financial year. The first'occasion was in 1891----92, when the debt was reduced by £117,282, and the second in 1922-23, when another slight reduction, amount ing to £101,061, took place. The third occasion was in 1934-35, when the huge floating debt of £22,856,981, comprising outstanding Treasury revenue bills amounting to £3,452,109 and Treasury bills for £ 19,404,872, were paid off. The policy of the present Government is to transfer the domicile of the debt to New Zealand. This was stated by the Minister of Finance (the Hon. W. Nash) in his Budget last year. He said: "The net effect of the year's operations was an increase in the debt of £1,979,881, bringing the dnbt as at March 31, 1936, to £282,561,098. There were, however, other movements in the debt which ar c worthy of note. The debt held in London decreased by £2,260.300, and in Australia by £590,900. This means that the external debt of the Dominion to be provided for out of our exports has fallen by £2,851,200. The debt domiciled in New Zealand increased by £4,831,081, but behind this is a decrease of £2,995,770 in the debt held by the public, and an increase of £7,826,851 in the debt held by Government Departments. These movements represent a considerable improvement in the debt position as a whole. Any particular reduction in the debt held abroad represents a lightening of the debt burden upon the Dominion. While it involves a redistribution of income, the debt held internally, involves no net burden on the Dominion as a whole, t>ut the charges on the debt held abroad mean so much less available for the purchase of goods for consumption in New Zealand. I may add that it is the Government's £01107 not only to refrain from further borrowing abroad apart from conversion operations designed to lighten the interest burden on the existing debt, but to endeavour to steadily reduce the amount of overseas indebtedness."

So the New Zealand taxpayer must take comfort from that.