PUBLIC DEBT

Nelson Evening Mail, Volume LXIII, 2 August 1929, Page 5

PUBLIC DEBT

INCREASED BY LOAN The public debt at the 31st March, 1929, amounted to £264,191,983, a net increase of £12,795,731, during the financial year. Honourable . members should understand, however, that this increase included £5,379,105 on account of the £7,000,000 loan to which' I have just referred. 1 must explain that the wjiole £7,000,000 was not'added to the debt as at the 31st March because .the last instalment of the loan, was, in terms of the prospectus, not received until the 2nd April. The proceeds of this loan were not drawn upomat all.for last year's requirements, so that the loan belongs entirely to this year's finance. The debt increase for this year will, of course, be less by the amount already added to the debt on account' of the"loan by the 31st March last. Apart from the £7,000,000 loan, the aggregate of additions to the debt for the year was £10,650,750, chiefly consisting of new loans for public works, State advances,.and other developmental activities (£9, 497,910). The first two items were wholly raised In London, and of the new loan's and expenses £5,409,547 was raised in London, while the balance of £4,497,910 came from the proceeds of local issues. Of the new capital raised diu-ing the year £3,0G7,910 was for State advances, £200,000 for State forests, and the balance of £(5,230,000 for public works, the expenditure on which I have already reviewed. Concerning the 4 per cent. Consolidated Stock, honourable members will remember that there was £29,490,852 of it falling due in London on the Ist November next. Although it was obvious that renewal of this stock would have to be at a higher rate of interest, it was equally obvious that there would have been coisiderable risk in leaving the whole amount to be dealt with at maturity. Accordingly £5,000.000 of it was converted into 4* per cent. 1947 stock in May.. 1928, at the rate of £lo4} of the' new stock for £IOO of the old stock. This still left over £24,000,000 of the 1929 stock outstanding, so after assuming office I'deemed'it advisable to make a further offer to holders in January last to convert up to £12,000,000'of the stock into 4J per cent. 1948-58 stock similar to that issued for the £7,000,000 loan,, with wliich the conversion offer was concurrent. The offer was £IO4J of the 1948-58 stock for £IOO of the 1929 stock, and on these terms, which returned investors £4 15s 3d per cent, over the full period of the new stock £11,729,490 of the 1929 stock was converted. The cost to the State o'f the new stock, allowing for redemption of the conversion premium and other expenses over the period of tho loan, is £4 10s -lid per cent. This important transaction was successfully carried out, and the terms, in the light of the ruling fates of interest, were very satisfactory. In addition to the large conversions, £1,104,500 of the 1929 stock was disposed of by.subsidiary operations during last financial year. These operations include repayment of £502,500 of the stock out of Public Debt Repayment Account, conversion of an odd amount of. £30,000, and redemption of £572,000 out of the proceeds of further sales of 1947 stock. To sum up the position: £17,833,990 of the 1929 Consolidated Stock has now been cancelled, and further parcels amounting to £382,500 were held by the Treasury, as an investment, awaiting cancellation, so that the total amount held by the public on the 31st March last was £11,274,350. Tlys is a more manageable amount, but 1 am hopeful of reducing it still further before the maturity date on the Ist November next. In fact, as local money is relatively plentiful at present, I am raising some of the funds in New Zealand for redemption of this stock, and, including the cancellation of the £382,500

of stock held by the Treasury on 31st March last, have already disposed of some £BOO,OOO of it in this manner. The effect is to transfer so much of the. debt to New Zealand, which will be a sound proposition economically. ~; ■ DEBT REPAYMENTS' ',. Including the £502,500 of.TOgLstock just referred to, repayment*;.:of7debt during the vear amounted to .£3,234,124. '. :::■■:■ SUMMARY OF DEBT OPERATIONS The changes in the position of the debt (hiring 1928-29 may be! summarised as follows: The debt as at Ist April, 1928, was £251,390,252, and at 31st March, 1929, £204,191,983. CLASSIFICATION OF THE DEBT £^' Ordinary 151,48'8J652 War 70,881,200 Discharged soldiers 8,287,050 State advances 33,535,000 £204,191,983 At first sight £204,000,000 of--public debt would appear to be a staggering burden to be carried by our relatively small population, and undoubtedly it would be a very heavy -burden for "the Dominion if the debt WereAi-hoTIy deadweight like tin' debts of most of the countries of the Old World. Our war debt, of course, is wholly unproductive, but it now amounts to little more "than one-quarter of the total. The greater part of the remainder, raised'for public works, land-settlement, and State advances, is self-supporting. The. proof of this lies in the expenditure .."figures. For instance, during the las.t financial year the actual payments for interest and statutorv debt repayment charges on the debt 'amounted to. £12;7.79,721, but, as I demonstrated when -dealing with the expenditure earlier jo .Ujis Statement, only £6,024.395 of .' the burden fell on the 'taxpayer,, "and_!:of tliis amount the greater portiorvr-.to wit, £3,797,97!) —was on account of war debt. The balance of the interestpayments was provided for out of the earnings of our interest-earning assets. State Advances, for instance,' provide the whole of the interest on their-por-tion of the debt. Further, in addition to the actual recoveries in cash, it must not be overlooked that the expenditure of the capital which gave rise to the debt has contributed in no small measure to the development.,of the Dominion, and though it cannot he accurately assessed in pounds, shillings and pence, it cannot be gainsaid: that the railways, roads, bridges, and other public works have been productive to a greater degree even than, is indicated by the expenditure figures I. have.just quoted. .:-.-" The Government is certainly not going to embark on any programme 'of extravagant expenditure out of- loanmoney/but is going to see to it'th'at as far as possible further debtcurred only for the purpo'se of providin<r what is essential for. "the ;e'cOndmic development of the resources- /of. the country. So long as this princlphr'is observed, and steps are taken,to see that the State obtains full value for its money, the wealth of the will increase at a greater rate than the debt charges, and there will consequentlv be no increase in the relative burden on the taxpayers. Guided by these principles the Government will have no hesitation in borrowing the additional capital necessary for land settlement, for State advances, and for the completion of the trunk railway lines.