WELLINGTON NOTES.

Hokitika Guardian, 23 December 1924, Page 4

WELLINGTON NOTES.

F.XCESSTVE BORROW 1 NO. (Special to “Guardian”.) WELLINGTON, December 17. A prominent Wellington hanker appears to he somewhat impressed hy the extraordinarily heavy borrowing in London hy the Australian and New Zealand Governments and local authorities, and he is very much concerned hy the remarks of the “ Bankers’ Alngiy.inc ” (London) for November. 111 an article on the “ Problem of the Australian Exchanges ” it is stated, •• It is a remarkable eireuinstance that while money in Australia is thus at a substantial premium, when expressed in British sterling, there should have been a persistent policy of borrowing on the part of the Australian States and the Commonwealth in London. The coniimial flow of credits produced by this borrowing must add to the difficulty of the present situation, and this is not a healthy side of the problem. It clearly demonstrates that whilst Australian trade is prosperous, as measured against its international engagements the Governments of the country are continually incurring fresh obligations to meet their own engagements. It is satisfactory to note that this situation has been recognised to some extent hy the decision of the Commonwealth Government to raise an internal loan oi 210,1)00,000 in order to diminish Australian appeals to the London market, yet this policy has been speedily followed by tbe ( ominonwealtli raising 2:1,000.000 in London on bills, and Queensland coming for a L 1.000,000 loan. Hindi of which represented new money. It is round this point of Australian borrowings thal a study of the position should he concentrated. for it is a matter which may lie fraught with grave consequences for the citizens of that Commonwealth. The heavy and persistent borrowings of Australia are causing some anxiety to economists 011 this side. During the past ten years Australia has borrowed despite the impediment caused hy the war period, no less than L‘1.)0.000,()00 in London, and this addition to the spending power ot a community nuiu--1,,.,ing something like A. 200,000 cannot he without effect upon the economic conditions prevailing. Indeed, certain observers are disturbed at the manner in which spending upon luxuries has grown in Australia and the lavish outlays by Governments as a consequence of these borrowings. The burden placed upon the future hy the steadily increasing debt is concealed by the new borrowings. The situation has an effect of creating an unnatural ' degree of activity in hur-iuess in the Commonwealth and D.c- . ' reflected in the operations of tl.. • d;s. which show that they have had to meet great demands for accommodation.” This ot the opinion of the Wellington banker applies with equal lone to New Zealand. 11 igll prices for produce and the I squandering of borrowed money are creating a prosperity with a hectic Hush that is supremely dangerous. EXCHANGE EXPERTS.

The speech delivered hy the actingchairman of the Rank of New Zealand at the half yearly meeting of shareholders in which he touched upon the exchange difficulty has brought lo light fresh crop of experts who have rushed into print to air their views. Mr W Nash, secretary of the New Zei kind Labour Party, who is regarded as Labour's future Minister of Finaice. contends that it was misleading to sav that exchange had advanced only 2 p-r rout, while wool prices had arisen £ 1,, 100 per cent., and butter by about -0 ]H . r cent, lie stated that "This compares the actual rise 01 clcrges I',,- exchange with the percentage increase for butter, wool, etc.” He |m ‘‘ ther contends that since I'll I when the inte was lAs it has increased to •>•>*. the percentage increase being 2(!(i per ~.,,1. Where Mr Na-'h goes astray 1in assumin'-, that tl xchaog- «P"'l ill mu is a ' hai-.v lot a sei vice. " i as it is the price of a hill, or drait 'or (;10‘). The quotations are the !> 11 \i• A and selling rates. For a bill of CiOtl on London I lie hanks will give L'!)7 A< whereas in UH 1 they were giving '-‘■o As. Thev are now giving 22 per cent lex's than they were giving in DHL and the position was therefore correctly Stated by the acting chairman. Wool is double the price it was and has therefore risen 100 per cent. IL did not take another correspondent long to expose Mr Nash’s mistake. Another 1 oriespnndent suggests the issue hy the Government of CA0.000,000 in premium bonds of (AT each with interest at :i per cent per annum and monthly drawing of prizes of 210,01)0 down to 2 A 17s Od. This is an old method of borrowing and much fa\oiued in France and Itelgium. This scheme of borrowing was suggested to the British and also to the Dominion Governments hut received no support. Inquiries were made into the matter hv the British nulhorilios wlm could mil see their way to recommend it. The obviously inexperienced “Expert” says. “ Cannot our shrewd financiers see that by taking depositors' money and rushing it off to London in order to gain a few extra pence, they are

(•rippling the hands that Iced them, and impoverishing the laud that enriches them,” and thus gives further proof of the old saving that “ Folds rush in where angels fear to tread.” According lo this expert the exchange problem is a myth. All sorts of people have sugrtOsled all sorts of remedies, hut none have ventured to suggest the effective cure and this is for the Government and local bodies to cease borrowing i t London. The difficulties of the exchange situation will continue so lone as this borrowing continues, unless. of course, relief comes from a substantial decrease in the exports. If the imports expand our industries will suffer, if the exports contract the producers will suffer, if the borrowing ceases no one will sillier but politicians.