WELLINGTON NEWS

Hokitika Guardian, 15 July 1927, Page 4

WELLINGTON NEWS

BORROWING IN LONDON. (Special to “ Guardian | WELLINGTON. July Id. In April last the Commonwealth Government issued in London a d per cent conversion i'oan for t C 11.711,000. the price to the public being COS per cent. Less than £0,000.000 was converted and the underwriters were left with 27 per cent of the amount. Last week the Commonwealth Government issued another •> per cent loan for C 7.000,000 at £'9B per cent and the underwriters were left with 90 per cent. This issue was a dismal failure and must he very disappointing to the federal authorities as it is no doubt To the underwriting authorities in London. These successive failures of Australian loans are not accidental and there must he a cause for this. It is evident that London financiers are of opinion that the Australian States and the Commonwealth are over-borrowing, and in that opinion they are not alone, for grave concern is evinced in Australia hv bankers and business men at the growing harden of debt. Ever since the Armistice loan money has been pouring into tiie treasuries of the States and of the Federal Government, and tinmoney lias been squandered just as quickly as it has been received. This lavish expenditure of i'oan funds added

to one or two good seasons has created in Australia an unwholesome prosperity and the day of reckoning is not far off. When Australian begins to taper off borrowing and drought takes hold of the country the economic conditions that will result will cause dire distress. Borrowing in London must he eased ofT because Britain is unable io satisfy all the demands for loan funds. The recent meeting of international hankers in Washington gives rise to the belief that some plans for reviving European trade arc contemplated, and the lirst steps in this direction is the stabilising of tbe currencies of Era lire and Italy. This is likeiV to result in more stringent monetary conditions throughout the world. But Australia will go on borrowing, and if the money cannot he obtained in London, then the United States will be tried. The fact that loans in great volume have been raised in the United States by many countries including the Commonwealth. Queensland and New South Wales, affords London bankers and financiers much food for thought. !

The Westminster Bank which lias figured so prominently in the flotation of Australian loans in Loudon has an article in its latest review on the capital market in Great Britain and America, and raises the question whether London’s pre-eminence as the world’s financial centre has been at ai'l modified by the events of the last thirteen years, and whether the extraordinary rapid progress made by the United Stales

Ims rendered New York a more serious rival to London. It was inevitable that

the development of America’s almost unlimited resources should eventually, make her not merely self-supporting as regards capital, but should leave her a margin for overseas investment, and the events of the last thirteen years have expedited the progress. That America, with her population, area, natural resources and industrial plant, should piny a more prominent part than hitherto in ihe supply of the world's new capital is in many ways a desirable feature, in the opinion of the reviewer, | which need cause no undue apprehension. British exports of capital' will tend to increase with the revival in the country’s trade generally, hut there is some hope that the activities of London and New York will in this respect tend to be rather supplementary rather than competitive. j flow far America’s inevitable growth in importance as a world-wide investor , will re-act upon her political and ceo- 1 nomie outlook is uncertain. Tier traditional' seclusion from the affairs of the outer world can scarcely fail to he •vm.itfiod hv the creation of new matur'd rttere.'ifs in countries many thousands of miles away. Economically, the new conditions may have a decisive indueme rn .American tariff policy, and ' L-t'O'ir'itouej loans involve the ever' dollars or pounds, hut of steel r ds, locomotives, machinery and r;!i-‘" forms of industrial capital, some modifications of the amount and direction of American overseas trade must result.