TREASURY BILLS

Hokitika Guardian, 16 March 1933, Page 8

TREASURY BILLS

A DANGEROUS AUTHORITY. Among the miscellaneous subjects contained in the last- Finance Bill suemitted to Parliament, one which requires watching, is the authorisation of greater use of Treasury bills to cover expenditure, comments a northern writer. As the Minister of Finance’ explained, it is customary to raise temporary loans by this device to carry on services until such late items Of revenue as income tax come t. 0 hand. Then the bills are supposed to be redeemed. Previously the Treasury has had the power to have outstanding at any period in the financial year floating debt of this character not exceeding one-third of the estimated expenditure. Now the amount ha? been increased to one-half. On'the figures for the coming year, as estimated in Air Coates’ statement of January 27, there will be authority to borrow in this manner up to a total of roughly £12,500,000. In explaining the Finance Bill he remarked that the deficit for this year and next would he financed hv Treasury bills. There is no other way of doing it, since the Consolidated Fund balances out of which such debts have hitherto been made good are exhausted. It is possible to estimate now what the floating debt of this character will be in the near future. Reference to the accounts shows that the amount outstanding at tlie beginning of the present financial year was £3,030,000. To this must be added the estimated deficit of £700,000 for this year a nd that of £4,500,000 for 1833-34, making a total of £8,230,000 as the total of Treasury bills likely to be in existence on March 31, 1934. In addition, it must be remembered the Government lias also taken authority under the bank indemnity legislation to borrow to an unlimited extent by the same device for the purpose of making good exchange losses suffered by the banks. The Minister suggests £1,000,000 as the probable sum in the coming year. The upshot is that there lias beep created the prospect of a floating debt resembling that which has reached such appalling proportions in Australia. According to the canons of strict finance such debt should be met out of future revenue. Jn Australia there is absolutely no. prospect of this being done. Even the problem of funding the amount, thus adding to the dead-weight of the country, is still proving impossible of solution. However unavoidable further reliance on Treasury hill, fiannee may'be, New Zealand should watch very carefully this possible creation of Heating debt, lest- here too it should grow absolutely beyond control.