DEBT CONVERSION

Rotorua Morning Post, Volume 2, Issue 470, 2 March 1933, Page 4

DEBT CONVERSION

The Government's debt conversion proposals announced yesterday will be met with a mixed reception according entirely to ] the point of view of the persons affected. On the whole, however, there is no doubt that the Government has made a wise and useful move toward reconstrucj tion and one which will do a great deal to lighten the rej strictions at present placed upon I capital. It cannot be gainsaid that proposals of this deseription are definitely a disturbance of the State's obligations under contract to its bondholders, but, as the Prime Mihister pointed out, it is nossible that this dis-

turbance will, in the long run, prove generally beneflcial by preserving the gilt edged character of Government stock. This is definitely threatened under existing conditions a!nd if the ' proposed interest reductions succeed in restoring a greater measure of financial stability, they will have justified themselves. Undoubtedly, the success of the proposed conversion will | do a great deal to stimulate industry and promote a_ more normal circulation of capital ; it will 1 also do something to counteract | the disastrous atmosphere of depression and pessimism which has for so long brooded over the country. Although the proposals have been euphemistically ' termed "voluntairy," they aie, ! in fact, compulsory for penalti ies have been provided which will deprive dissentients of any

benefit which they wouia orneiwise derive and in addition place them in a more uniavouiable position than those bondholders who fall in with the conversion proposals. This, in the face of it, may appear unjust, but it must be remembered that if conversion is to be atiempted at all,. it must be as nearly as possibie universal. There is no doubt that the national emergency calls for this measure and we j have no doubt that the public of New Zealand will appreciate that emergency and respond to the Government's appeal provided always that it is assured that the Government is making a sincere effort to improve con-

ditions. The proposals, as outlined by the Minister of Finance, are well conceived and comprehensive ; they do not eff ect the same measure of reduction as was the east in the English conversion proposals but they are, nevertheless sufficient on the Government estimate, to eff ect a saving to the State of 000 which will be offset to the extent of rather less than half a million by the resulting loss m revenue from income tax, etc. The nett benefit to he budget, it is estimated, is £570,000 ^ and this is a very considerable item. In addition, it is certain that there will be an even greater general benefit as a result of the general stimulation. of industry and the lightening of the interest load. The proposals will also nelieve the general ^ anxiety aroused by the possibility that the Government would attempt

further general taxation, aithough it must be remembered that the reductions, voluntary in theory, but compulsory in fact, place a considerable burden of taxation upon the holders of capital who are already paying for the privilege, The genera body of the country must not overlc'Ok the fact that the conversion proposals impose a considerable sacrifice upon the holders of Government boncls anc. securities ; if they do their part in this national emergency,, they may justifiably look to aH other sections of the community to contribute their share towarc. national rehabilitation. If there J^j^bligatio^ipo^olde^^f

capital to make sacrifices, there is also an obligation upon other classes to stimulate industry and production by hard work, greater thrift and a determination to meet and not to submit to their problems. In the present circumstances, it is almost a foregone conelusion that the conversion proposals will be generally accepted. But the Government must remember that it is asking for a very considerable sacrifice and it must demonstrate by its policy and th|{ sincerity of its purpose, that that sacrifice