WELLINGTON NEWS

Hokitika Guardian, 2 March 1929, Page 3

WELLINGTON NEWS

THE NEW ZEALAND LOAN. [Special To The Guardian 1 WELLINGTON, Feb. 20. The prospectus of the' loan issued by the New Zealand Government early in January is now to hand. Ihe loan it will be remembered was in two parts, £7,000,000 was for cash and £12,510,000 for conversion. The loan was offered at 95, and the interest rate was 41 per cent. The commission, paid to banker's and brokers was 5s per cent. The 'details given. in the prospectus are very full and very interesting. 'lt is stated at the outset that New Zealand Government debentures and inscribed stock issued and payable in London, and the -interest thereon, the property of person not domicile in New Zealand are not and will not be subject to any taxes, duties or levies by the Dominion.

The proceeds of the cash loan of £7,000,000 were to be allocated entirely to productive purposes, railways, hydro-electric power works, telephone and telegraph extensions and otner works being mentioned, and it is added that considerable amounts would be spent in Great Britain in the purchase of material required for these purposes. It is stated that for a number of years past the Dominion has presented balanced budgets and it is anticipated that during the current financial year a similar result will be achieved. During the year ended March 31, 1928, the reranu:showed a surplus of £179,076 which surplus brings the total revenue surpluses since 1914 to over £30,000,000. Apart from the provision of a £20,000,000 reserve fund in London this <£30,000,000 has been applied almost entirely to debt reduction or transferred to capital expenditure on development works.

The gross public debt of the Dominion on March 31, 1928 was £251,396,252 as against £245,580,889 on March 31, 1927. This shows an increase for the year 1927-28 of £5,546.363. This increase was mostly on account of public work. These figures do not include the 26,C00,000 raised in London in May last year. Against the public debt of New Zealand must he set tangible assets valued on a careful basis on March 31, 1928, at £262.542,305. Of these assets £224,713,845 are interest-bearing and productive, e.g., railways, telephones and telegraphs, electric development, advances to settlers and workers. Ciown lands, sinking fund, etc., and the remaining £37,828,460 are indirectly productive, such as roads, public buildings, etc. Redemptions of debt amounting to £2,477,136 were carried out during the year, of which £1,307,516 was provided from the year’s revenue, £366,370 from reparation receipts and the balance from other accounts. These redemptions include £1,607,525 on account of the War debt, which has been reduced from £81,843,543 in 1921 to £71,970,636 on March 31 last. This shows a total reduction in the War debt of nearly £10,000,000 since 1921. Approximately £25,000,000 of the outstanding war debt is funded with the Imperial Government on a 6 per cent annuity basis, which provides for its extinction in about another 30 years, with a (proviso, that the debt may be redeemed at any time by the New Zealand Government. All preparation! moneys received from Germany are being applied to the redemption of the War debt.

It is pointed out in the prospectus that on March 31, 1914, only 16 86 per cent of the total New Zealand public debt was domiciled in the Dominion, whereas on March 31, 1928, 42.75 per cent Of the debt was held in New Zealand. With respect to debt extinction it is explained that the Extinction of Public Debt Act passed by the New Zealand Parliament in 1925 substituted for the long term sink fund system a method whereby the Dominion’s debt reduction resources are now made available to purchase New Zealand Government securities on the open market for cancellation, thereby ensuring an actual redemption in the public, debt annually. For this purpose there is issued annually out of the Consolidation Fund a sum equal to half per cent of the debt affected (at present £186,059,312) and to this is added a sum equal to interest at 3J per cent per annum on the debt paid off. By this means a portion of the saving in interest on the debt paid off is applied to further repayments of debt, so that the debt reduction resources will be increasing year by year. It is estimated that the present debt will be liquidated in about 60 years, while all future loans will be liquidated within a similar period from the date of their inception. The portion of the debt which is funded with the Imperial Government as well as certain other loans, which have their own separate sinking "Funds, such as State Advances, have been excluded. No doubt this excellent provision for debt redemption is the primary cause ‘of the excellent credit enjoyed by New Zealand on the Loudon market.