WELLINGTON NEWS

Hokitika Guardian, 2 April 1931, Page 5

WELLINGTON NEWS

DEFAULT AND BANKRUPTCY. (Special Correspondent.) WELLINGTON, March 31. Even we in New Zealand cannot look with complacency upon the act of bankruptcy that the Premier ot New South Wales has enforced upon his State. Not to pay interest on due date is an act "of bankruptcy and this must have its repercussion throughout Australia. Mr Lang lias defaulted to bondholders of Britain, and not to the bondholders of the United States and it is difficult to understand this discrimination. Many people are under the impression that th e British Government■ or the Bank of England or some other impersonal and fabulously wealthy institution is bleeding Ausiralia with usurers’ terms. Actually the bulk of money that Britain has lent to Australia, New Zealand, South Africa and other British Colonics and Dominions has conte from thrifty individual Britishers. In many cases it represents part of the life savings of working meu and women who have provided in this manner for their old age. A great deal of it constitutes the sole means of support of widows and children, for Australian and New Zealand securities are authorised investments for trustees under the Colonial Trustee Act which has been ml inestimable boom to us, for it Ims placed out* bonds in the giltedged class, with great consequent (savings in interest rates. The British holders of Australian bonds have already lost heavily through the depreciation in the values of th e securities, and on top of this comes the announcement of default by New South Wales.

Can we wonder, if in the fac-e of all •this, that British investors are nervous? A recent cable message stated that the jobbers were quoting the widest nominal prices and are unwilling to do business. It is probable that some of our readers do not understand the' reference to jobbers. Jobbers are in a- class by themselves and are peculiar to the London Stock Exchange. A jobber does not deal direct with the public, but only with brokers. Furthermore, jobbers specialise in stocks; that is. some specialise in Colonial stocks, some in railway stocks and so on. A broker will approach a jobber and ask him to “make a price” say for New Zealand five per cents. The jobber will name two prices, the lower one representing the price at which the jobber will buy the stock from the broker, and tlie limber figure representing bis selling price. The margin between the two very seldom exceeds ‘2s 6d, which in Stock Exchange parlance is the jobber's “turn” or profit. When jobbers ask the widest nominal prices atid are tlieii uthvliling to do business, jt shows tlie state of discredit into which the. otm'k has fallen. It will be a long time before Australia will he able to approach Loudon lor a loon, for Australia’s name is now mud and some of the mud is bound to stick to New Zealand, for timid, nervous investors cannot be expected to discriminate between Australia and New Zealand. We shall suffer to some extent for the misdeeds of our neighbours.

Of course in the end the Commonwealth must pay it he bondholders who are not likely to lose, and the Commonwealth itself need not lose the money that it is forced to disburse for the default of New South Wales, for the money can be stopped out of the funds due to New South Wale* under the Federal Laws. If this is done, Air Lang may find that he will > be unable to finance the doles for the unemployed, or even pay the civil servants. Australia lias sown the wind and is now reaping the whirlwind. It has toyed with Labour Governments for a long time. The business people refused to be alarmed. “Let them stew in their own juice” was their cry, and now the business men find themselves stewing. Lang lias ruined the business of New South Wales and it will lie a long time bofoi*o recovery can be started, and among those happenings must he the obliteration of Lang and his militant Labour gang. Not only has lie declared a default, but his legislative measures spell repudiation in some cases and confiscation in other* 3 . The fixing of interest rates will cause ft {fight of capital from New South Wales and that will seriously hamper business. In all tins medley of miser, able events, let us not forget, that the majority of the people of New South Wales take a pride in their State and are jealous of its honour and good name. They will suffer Lang and his satelites for a time, but they will not stand them long. Serious things are due to happen in Australia, and this may mean a cleansing of political life in Australia. There > s an object lesson for New Zealand in Australia's aflairs, for Labour in New Zealand and Labour in Australia think and often act alike.