MONEY FOR WORKS

Rotorua Morning Post, Volume 1, Issue 191, 6 April 1932, Page 5

MONEY FOR WORKS

("Post" Special Commissioner) l •* Y.it *> ^

one million ayailable foruse in pp^iNiqN balance pay's" off bills

WELLINGTON, Tuesday. The terms and purposes of the £5,OOQjOOQ New Zealand loan underwritten in London were outlined this" afternoon by'the Minister of Finance, the Hon. ' W. Do-wnie' Stewart. The bulk pf the new money is to bs used from fhe redemption bf outstandirig Treasury bills and the remaining £1',QQQ,0D0 will be employed in financing capital works. • • * Mr. f Stewart' said the issue price was ' £96 10s, the rate of interest 5 P'er cent., and the stock would mature pn November 1, 1971, but the Goverriment would have the option of repaying' the loan, wholly or in part, on or after November 1, '1956 on giving' three month s1 notice. The return to investors, with re'deniptions at par at matuj-ity^ was £5 ls '9d per cent. and the cost about £5 5s 5d per cent. "Owing to the long?er term,0 said tbe Minister, '.'this cost* is much lighter than th'e cost bf the short-term bonds issued last year, and it is appropmately the same as for fhe 1930 London loan. Having regard to the present economic sifuation "arid the unsettled" state bf financial 'affairs genprally, the underwriting of the loan to fhese terms is highly satisfpctory and demonstr'ates that the faith of the London monpy market in this Dominion is ' unimpaired, notwithstandin'g'our fsmporary financial difficulties. ' ....... ...

Excjiange guesfion "Without entering into any eontroVersy ori the' exchange questiori," Mr Stewart crintinued," ?'I iriay * mention, as a matt'er'of general interest, that messages" reeelved from London stated that L'Ondori financial" circles riever expected' that any* other course ori exchange question would be taken by *New 'Zealand ,for they believed that New 'Zealand realised that any other action would have spelt' disaster as faf* as our credit and 'futur e horrowing 'were cbrieerried. This view is ■emphasised to indicate its importance iri connection with future loans maturing'in London. "Of the new loan, £4,000,000 will be used for funding £4,000,000 of Treasury hiils which mature in durie next. To "this extent the new loan will not increa'se the p'ublic debt as all that is irivolved is the substitution of longterni stock for shbrt-term Treasury bills. ' '

"Incidentally, it may he mentioned that the bills arose out of the arrangements made>last year with approval' of the London authorities to avoid exchange' costs by paying off debt in New "Zealand and issuing redemption '"bills iri London. ThuV neither fhe issue of 'th'e bills nor the present funded loan '(to the extent of £4,000,000) involved any increase in the public debt. It did5 result in transferring that much debt abroad ' although had the Loridori money market remained noriri'al,* this would only'have been tempora'ry! ' ■ , i > -- New Mpney i^vailable "The remaining £1,000,000 of the loan 'represents riew money and will he used 'in firiancirig a much "reduced programme of capital' works. "I agree with 'tho'se who hold that we shorild aim "at an early eessatiori of over sea borrowirig, but at the same time, a "sudden cess'ation, particularly on top of the sever'e* eontractiori in the 'national 'Income'frorii the fall in prices,"Ts' riot' 'iri "the 'best interest of the cbuntry. If/ pwirig to our "good credit, we ' can ease the position at reasonable co'st, we should" do so. In their {pec'erit report ihe ' economists coriimift'ee recogmse' this and say that while 'ovefsea "horrbwing should T'e gradualiy eliminate'd, this sliould not preclu'de recourse fo* the London* market' for* the^piifpbse' of "eoriipleting existing p'ublic works "and easing the process of adjustment.'"