WELLINGTON NEWS

Hokitika Guardian, 5 June 1926, Page 1

WELLINGTON NEWS

.NEW ZEALAND LOAN. (Special to “ Guardian.”) The New Zealand Government is offering for subscription a 5 per cent loan at £9B 10s and this is - better than ilia price obtained by the Now South (Wales Government for its 5 per cent loan of .£4,C00,000. The issue price of £9B 10s it may he explained is tDo upset price. Tenders below £9B 10s will not be considered, but those at the price and over will secure allotment. The New Zealand Government will not get £9B 10s for every £IOO of stock, because there is the commission to lie paid to under-

writers, advertising and Stamp Duty to provide for, and about. 3 per cent will cover this. The Government will , therefore net about £95 10s. Those } who subscribe for the loan at £9B 10s . will over the period of twenty years, which is the currency of the loan, ! get- an average return of £5 2s Od per . cent., because at maturity the Government has to pay £IOO for each bond , for which £9B 10s is paid now. Last year ufarly in May the Government , floated a -If per cent loan for £7,000, 000 at £94 10s and the return to the investor was £4 18s 9 per cent, but 85 per conn of the amount had to be found hy the underwriters. This loan was • placed on the market within a. week of the restoration of the .gold standard when tilings were regarded ith some uncertainty, lad apart from that the rate of interest was not. sufficiently attractive to the ordinary investor. All Dominion loans are what are known as Trustee stocks, that is, trust funds may he invested in them, and they have, therefore a special appeal to a certain class of investors. The underwriters are those for a commission of about 2 per cent guarantee the loan, consequently the terms on which the issue is made must meet their approval. The underwriters consist principally of the larger hanks, insurance companies and big financiers who have the call of ample funds. If the loan is fully subscribed by the public the underwriters just draw their commission and look 1 pleasant, if on the other hand the loan is not taken up by the public, as was the case with the loan floaied 1 hy New Zealand last year, then the > underwriters must find the money. 1 Tlie loan having been underwritten, : it can he claimed that the loan is ‘ floated, for it is immaterial to the Government whether private investors or the underwriters find the money. Of course every Government like to f see tho loan a huge success hy being * oversubscribed, and that has happened with the New Zealand loan. Investors in recent months have developed m new tactics, for instead of putting in applications for the loan at the upset price, they held off until after allotment when the underwriters are load- j ed up, and buy the scrip from flic j underwriters at os to 10s below the j advertised price. When this happensthe underwrites lose so much of their! commission. On its merits the New; Zealand Loan, should sell like the | re- !

verhial ‘‘hot dikes,” notwithstanding the crisis in the coal industry which looks very ugly. New Zealand is now paying a high price for its loan nion.-v, and there are loans maturing which must he renewed at the higher "ate. The Government borrowed in London, £5,000,000 in 1923, £0,000,000 in i'.TI, £7,000,000 in ID-25, and £0,000,000 this vitir, or a total of £24,000,000 in 4 years, which is going the pace some. This year’s loan will mean an addition to the interest hill of over £300,000. The question of tapering off borrowing will very soon become a live .subject;. INFERENTIAL STATISTICS. The importance of reliable wool statistics to hot li growers and manufacturers is freely admitted, and it lias liooii suggested that the work should be undertaken hy some organ-

isntion specially set up for the purpose, but Mr E. E. Hitchcock, formerly Deputy Dirceior of Wool Textiles and Chief SLuJieial Officer of the War Office thinks otherwise. He conlends flint the wool prodnetion of the world was fairly accnrptely known, the mcalculahle factor was that of consumption. Price and fashion re-acted in an immeasurable ivl'innor on the weight of new wool passing through machinery during a given ]ieriod. With the host will in the world estimates of consumption could contain margins of error and difference amounting to 100 per cent. Tlis experience was' that central stb'.t ist ical machinery was just as likely to go wrong as right; in fact more likely In be wrong. Inferential statistics were (he only ones worth while. 'I ho greater the number of individuals wuii knowledge of the business who made the inference, the nearer one \"s

likely to get to the truth of the matter. There were, however, certain broad facts. There was a definite and steady increase over a period of years in the demand for clothing and other goods made from wool, 'flic spindle capacity of the world was steadili increasing also, and it was just «'S clear the slice]) population,' and ‘’ecu the wool yield of their iiceces were not increasing in the same propel l ion. Prices were lan undiminishod factor in determining the volume of clothes purchased, and consumption of do ill would he restricted so long as prices remained above the general lei el.