LOCAL BODIES’ LOAN

Hokitika Guardian, 19 April 1921, Page 3

LOCAL BODIES’ LOAN

(Financial Exchange). The local bodies in New Zealand aro at last beginning to realise that it is utterly impossible at the present time to raise loans in New Zealand at the

rates of interest to 'which they are restricted. About six per cent, is the limit, but those with money available

for investment can command more than 6 per cent, and not be obliged to lock up their funds for years. As a matter of fact there is not much idle credit in New Zealand at the moment, and many large houses perfectly sound and stable, are finding it very difficult to arrange finance. The New Plymouth Borough Council a. few days ago made strenuous efforts to obtain £150,000

; and scoured the principal leading es- ; tablishments in Wellington without success.

I The Prime Minister, who was interviewed, took up tlie attitude that he was determined that the rate of interest on any local body loan raised in New Zealand should not exceed 6 per cent. Mr Massey very kindly stated that in regard to loans raised outside New Zealand he would fix no interest limit. Why the investing public of New Zealand should be penalised in

this particular manner was not explained, probably because there was no reasonable explanation to offer. The New Plymouth Borough Council must raise the money it requires outside New Zealand and will in all probability be I forced to pay 7 per cent. Since the | war one local body—the 'Auckland City Council—has ventured on tbe London market, and with success. The Auckland City Council has just obtained £300,000 at 64 per cent, with the guarantee of the New Zealand Government. The Auckland City loan flotation opens up an important question. Will ' tho Government guarantee all local | bodies’ loans that may be issued in London, or are certain of the larger local bodies to be specially favoured ? It can be said with certainty that in guaranteeing tho Auckland City loan, the Government has established a very bad preeedent which is calculated to do a good deal of harm in the future. It is quite within the bounds of pro- ■ babflity that London financiers will I in future, insist upon Government hacking of all local bodies’ loans issued in London, which would not be a pleasant thing to contemplate, for besides increasing or establishing a contingent, . liability, the credit of the Government itself would be, to some extent, impair!ed through these guarantees. It is a vi--1 cions principle to introduce into our national finance, because ( there is no knowing what the ultimate effect will lie. Many of the larger local bodies are in need of much money, at all events they have obtained the authority of the ratepayers to raise a very largo amount in the aggregate, and if all I lon ns are floated in London the total

will not be far short of £2,000,000 which at 7 per cent, will mean £140,000 per annum.

It may be tbe desire of the Government to force the local bodies irto borrowing in London, because loans raised there would have a direct and immediate beneficial effect on New Zealand. The banks are extremely short of loanable credit in London, oo'ipequently it is very difficult to remit to London. The £300,000, just raised by the Auckland City Council means making available in London that amount which could be utilsed for meeting the requirements of traders who desire and must remit to London. It remains to be seen what effect the British coal crisis is going to have on the money market and on the trade of Britain with the self-governing Dominions.