WELLINGTON NEWS

Hokitika Guardian, 16 June 1926, Page 4

WELLINGTON NEWS

BORROWING IN AUSTRALIA

(Special to " Guardian.”)

WELLINGTON, June-15.

The New Zealand Government as well as some of our local bodies have found it convenient to borrow in Australia, and recently the Government raised half a million sterling at o', per cent; the Wellington City Council obtained £IOO,OOO at Co 12s Oil per cent, and the Christchurch City Council £15,000 at £5 15s per cent. The local bodies arc payi mi higher rates ol interest in Australia Ilian they are privileged to pay in New Zealand. The two councils named nr not permitted to offer more than 5.V per cent, for loans raised in tnc Dominion, hut they can pay higher rates in the Common wealth. This hardly seems fair, more especially as the money raised in Australia is not subject to income-tax. while the reverse is the case with money raised in the Dominion. Ibe idea apparently is to check the upward trend of interest because money, like water, will find its own level. Money knows no frontiers, and recognises neither races nor creed. It cannot he fenced in. because it will climb over or crawl under any such barricades. Tn matters ot finance as iu almost all other things it is safer to allow natural laws to operate, if there is a scarcity of credit, as there is at the moment, owing to the contraction of the national income through falling prices rates must advance, and if there is an abundance of credit iho rates of interest inevitably tall. New Zealand is very heavily in debl to Australia; our trade balance with Australia at any given time will show a credit in favour of the Commonwealth of over a million stalling, lilt loans raised there will tie. paid o\ei. not in cash, but in goods, either goods of Australian origin, or goods of other countries, with which both Australia and Now Zealand have trading relations. A set off against this is the large amounts that are being sent

across the Tasman Sen for investment in Australian Stock Exchange Securities. The Australian States and the Commonwealth cannot view Lhis borrowing nu the part of New Zealand with equanimity. Already the Australian Loan Council has directed attention to the subject. The, Council has decided to ask the Commonwealth and State Governments to give consideration “ to the question of the taxation of interest on such loans anil securities.” At present it is possible to float loans for other countries in Australia. or for the investor in Australia to buy their stocks and hvoid taxation on the interest he receives. This intimation by the Council has to he taken as a warning that States and Commonwealth retain to themselves their constitutional rights to reach interest derived from such securities by imposing income tax upon it. Furthermore. it is no doubt the desire of the Federal authorities to keep other borrowing countries out of the Australian market. New Zealand can scarcely object to tills, for under similar circum stances wo should probably adopt the same course of action. EMERGENCY LOANS. To meet the conditions caused by unemployment, the local authorities arc to be given the power to raise loans without first obtaining the* authority of the ratepayers. A good many arguments may be adduced in support of lhis, all the same it will constitute a dangerous precedent, unless the powers for loans raising are hedged in with strict conditions and limits imposed ns to the amounts to be raised, and the time in which it is to be raised. The danger of such emergency schemes is that when the special reasons for their imposition have passed, the alleged emergency is supposed to continue. Everyone knows what happened in recent War legislation. which was all more or less of an emergency nature. The -Mortgage Extension Act which was a necessary piece of War legislation was maintained for a considerable time, and required a great deal of agitation to

have it removed from the Statute Rook. The Rent Restriction Act is still effective, imposing unnecessary handicaps on many people. Rut the worst measure of the lot was the Hoard of Trade Act which clothed the Government with arbitrary powers which have been used to the detriment of the community, '[’here is thus real danger that the emergency legislation to meet .special conditions may he established. and ratepayers who must in the ultimate carry the burden should watch all such legislation to see that they- are not victimised. A definite policy as to the treatment of the un-' employed should be laid down before the local authorities are permitted to borrow for the relief of the unemployed.