N.Z. FINANCES

Hawke's Bay Tribune, Volume XVII, 3 December 1927, Page 6

N.Z. FINANCES

SIR JOSEPH WARD’S CRITICISM RESENTED BY MINISTER. HON. W. D. STEWART’S STATEMENT (Special to “Tribune.”) Wellington, Dec. 3. Strong exception was taken by the Minister of Finance (the Hon W. D. Stewart) in the House of Representatives last night to a remark made earlier in the afternoon bv Sir Joseph Ward that the finances of New Zealand were ‘rotten.’’ “1 think that is a serious statement to make,” said Mi. Stewart. “Such a statement, coming from him, is likely to go abroad and everybody knows that no Dominion’s credit is higher than that of New Zealand. I think it is unfortunate that such a criticism should come from the Rt. Hon. gentleman with reference to the finances of New Zealand.” Mr. Stewart said he agreed with Sir Joseph Ward that loan expenditure was heavy and should, as quicklv as possible, be contracted and that loans should, as far as possible, be devoted to revenue-producing purposes. He also agreed that every year something should be done to reduce the “deadweight” debt but to curtail borrowing suddenly or to cut it in half would not result satisfactorily to the Dominion GROWTH OF PUBLIC DEBT. So far as the growth of the public debt was concerned the Minister sa»l that because the Finance Bill contained authority to borrow £7,(KX),Ot)U in the aggregate it was not to bo assumed that that would all be raised in one year. When the loan authorities of any particular department became exhausted it became necessary to provide fresh authorities. On the general question of the growth ol the public debt he could only say that so long as the public expected the Government to continue to expend large sums of money on hydro-elctric schemes which, in other countries, were owned and operated by private companies, and so long as money for railway development was called for. then it was imperative that money should be borrowed. The main thinu should be to see that it was spent su far as was reasonably possible fo‘ productive purposes. It was true that some loan expenditures were not reproductive but if the public decided that the public debt should no longer increase H would be quite easy lor the Government to realise on all tho--enormous assets which involve such large public debt and to reduce tlio debt by at least two-thirds STEADY CONTROL The Minister asked whether the schemes of railway improvement and hydro-electric works should be stopped in the middle of their completion. The best thing to do was to complete these commitments and make them revenue-earning. He thought that the best thing to do was to contract the debt steadily each year and payoff as much as tiler could ol tnu deadweight debt such as the war debt, winch was a burden on the taxpayer, and to see that any lurther of loan moneys was. as far us it was feasible ana practicable, confined to works which had a reasonable prospect of earning interest on their cost of construction. Mr. Stewart said he admitted that the question of whether railways were a wise method ot puonc expenditure was a problem that was becoming increasingly open to criticism, because the indications m New Zealand. Australia, England, nnd elsewhere seemed to show that it was questionable whether the railways were not going to be out of date as a method of transport He agreed that the turther they extended the railways the more they increased the Durden

on tne taxpayers. So far as some railway lines were concerned every mile meant an in creased interest bill and the running charges showed an- extra loss above the interest. From an economical point of view it would be better, in the case ot some railway lines, to close them down and pay interest on their construction rather than pay heavy operating costs to see where they were getting to. The indications were that the position of the railways was becoming increasingly difficult and the whole policy of railway extension and construction should be considered very exhaustmgly and critically betore any very expansive programme of railway construction was carried out. / THE INTEREST BILL. It was said that the interest UH was too high, but when thev analysed the amount of £10,000,009 and deducted the amount attributable to interest on the war debt the bill was reduced to £7,000,000 odd. Deducting from that the portion of the interestpayment which came not from the taxpayer but from those who had borrowed money from the State Advances Department, the net burden to the taxpayer would be between £2,000,000 and £2,500,000. The public debt was reproductive and self-sus-tained to the extent of over 70 per cent. Regarding remissions in taxation, the Minister stated that between 1921 and 1925 over £4,090,000 was made in remissions.