The Guardian And Evening Star, with which is incorporated the West Coast Times. TUESDAY, APRIL 8, 1930.

Hokitika Guardian, 8 April 1930, Page 4

The Guardian And Evening Star, with which is incorporated the West Coast Times. TUESDAY, APRIL 8, 1930.

A PROSPECTIVE LOAN

New Zealand’s undertaking last year I with respect to London loans automatically expired last Monday, ano ! from the Ist. inst. the Dominion is , able to resume normal Borrowing: opI orations on the principal overseas money market. The restriction was l self-imposed. In May, 1928, to- meet a portion of the requirements for the | financial year which ended oil March , Ul, 1929, the ReSbrni Government! borrowed £5,000,600 at 4J,- per cent, at £94 10s, which represented a return to investors of £4 19s Bd, and the cost to the State was £5 3s sd. Under normal circumstances the next London loan would not have been raised until about May, 19.29, ibut in September, 1928, advi.ee was received from the Government’s financial advisers in London that the money market was likely to harden in the near fuure, and New Zealand was recommended to borrow at an early date against the requirements of the following financial year, that which ended a week ago. As the general election was in progress when thi information was received, the then Minster of‘ Finance, the Hon. \\ Doiiie Stewart, decided that lie would Hot be justified in determining what action should he taken, preferring to defer consideration until the result of the election was known. The Reform Government was defeated, and it was left to the incoming Minister of Finance, Sir Joseph Ward, to say whether the advice of London experts should be acted upon. Sir Joseph came to the conclusion that it should he, and, accordingly, on January 8. 1929, lie raised on the London market a loan of £7,000,000, at per cent at £95, the yield to investors being £4 16s sd, afid the cost to the State £5 0s Id, which is cheaper than the '•ost of any other loan raised by the Dominion for some time. Justifying his decision, Sir Joseph Ward stated in his Budget with reference to the matter that with the rise of the bankrate and the general situation that had developed in the money market, a higher price- .would have had to be paid had he delayed going on the money market until the usual time: it was announced alsoi that the taxpayer had not been involved in any loss, as the proceeds of the loan were reinvested in the short loan market at an average rate of approximately £5 3s 9d, with the -result that a profit had been made on the moneys for the period during which they had been held. The proceeds of that loan have, of course, since been utilised in New Zealand for the purposes for which they were raised, namely, public works and hydro-electric construction and railways improvement. One of the conditions of the flotation was that New Zealand would refrain from going on the London money market for a further loan during the balance of that year, and the following financial year, a period which has now expired. The effect of the transaction was that the country had borrowed before the end of one financial yeijr its norma] requirements for the next year, and had agreed not to go on the market again until the financial year 1930-31. With the start of a new financial year New Zealand is free to resume financial negotiations with London. The Finance Act of last session contains new borrowing authorities up to £5,500,000- for the purpose of public works, education and forestry. Incitlcnta.lv, it may he noted that there are in existence unexhausted authorities for the raising of loans no to £27.000.000. It is anticipated that the loan, which no doubt will be floated in London towards the end of April or the. beginning of May -next, will not exceed the average of similar loans raised during the last few years. It seems likely that the money will he needed as a means to assist in coping with unemployment, and it is to he hoped that all public works undertaken will be of a permanent nature, ami that tlmse merely of a “relief” character will be vetoed as far as possible, so that the greatest value will accrue in 1 respect to all public works expenditure.