WELLINGTON NEWS

Hokitika Guardian, 4 March 1932, Page 3

WELLINGTON NEWS

THE DOMINION’S CREDIT. (From our own Correspondent), <• WELLINGTON, March 2. For years we have boasted, and not without justification, that the credit of New Zealand stood as high, or htgner, than any other overseas Dominj ion. London financiers have always j spoken appreciatively of New Zeaj land s credit standing, and it behoves us to maintain our credit. The question arises in this time of stress, can we hold up our credit? It must be i admitted that it is a difficult matter, but at least we should avoid doing anything that would depreciate our t credit. The first indication that we had that our credit standard was not rated very high, was last year, when the Government discovered that a loan could not be floated in London. Perhaps there was nothing surprising in that, for no other country was able to borrow in. (London. As an alternative to issuing a loan, the Government issued Treasury Bills, which were discounted at £6 Is 3d%

I wmcn is a very High. rate. This year the Government will not be able to issue even Treasury Bills, and so we are thrown upon our own resources. Not being able to borrow is a hardship to this country because for the last ten or fifteen years we have been borrowing bn the average £6,000,000, and in one year it amounted to £lO,000,000. Now that we have to manage a® beet we can with our own restricted resources panic, appears to have seized the authorities,..and the. business com- i munity appears to have lost its sanity. The clamour for a free exchange * market on the part of some sections of the community shows the narrow views that are held on . this matter and the shortsighted views -as to the ; effects. The. man-in-the-street must be ; perplexed when day after day he reads j about the exchange, and like a good sport he no doubt leans towards a free market. Obviously the ideal is a free market, but ideals have to be jettisoned when the credit of the nation is in jeopardy. It may not be out of place to explain how thisi exchange problem I arises this year. It is due atmost entirely to the inability of the Government to borrow in London. The New Zealand Government has to pay in-j terest, etc., in London about £8,000,000, and the Local Bodies have to pay j about £2,000,000. This. £10,000,000 j I was paid last year without giving rise ■ to an exchange problem, and the man- j in-the-street is justified.in asking why? Last year the Local Bodies were able to meet their own interest of £2,000,000. The Government met .the £8,000,000 by raising £4,000,000 on Treasury Bills in London, and remitting £4,-. 000,000 from New Zealand. Last year the Government haqf to pay exchange on £4,000,006, and that cost about £400,000. . This year the scene was changed. The Local Bodies, or at least some of them,,may not he able to find their quotas of interest, and the Government could not let them, default, so the Government lhas made Arrangements to pay up 'if ■ necessary. The Government has again, to pay £B,000,000'*'the same as last year, but in. addition it has to repay the £4,000,000 of, Treasury Bills issued last year, so that the Government has to remit from New Zealand during the current year £12,000,000, which with the £2,000,000 on Local Bodies’ account makes the £14,000,000 which the As- , soda ted Banks have agreed to find out of Export funds. Last year it cost the Government for exchange ( £400,000 and Local Bodies £200,000, a total of £600,000, because the ex- , change has to .be paid on the £B,- , 000,000 of interest and on the £4,- . 000,000 to repay the Treasury Bills. , The Local Bodies pay no more than last year. Compared with 1931 ex- ( change is costing the Government £BOO,OOO. The 'position is this, leaving out the , Local Bodies. The Government must pay the Banks £13,200,000 in New Zealand to secure £12,000,000 in London. The money in New Zealand must lie found by the people of New Zea- ( land. The agitators for a free exchange want to see the price of exchange raised to 30 per cent., if that happened the Government and Local , Bodies must find £4,200,000, instead of £1,400,000, an increase of £2,800,000 and that must he squeezed out of the pockets of the people. The Government lias to face a deficit of £3,000,000, another million or more is wanted for the' unemployment dole, and if exchange is to cost another £2,800.000 it will about cripple us this year. And wo must not over- I look the effect of a high 'exchange j rate. It would he a clear indication to the world at large that New Zealand was in serious financial difficnl-

ties, and that in itself would cause a heavy depreciation of our credit.