Inflated Land-Values Follow Borrowing

Sun (Auckland), Volume II, Issue 490, 20 October 1928, Page 1

Inflated Land-Values Follow Borrowing

FINANCIER’S ADVICE DANGER OF CHEAP MONEY (From Our Resident Reporter.) WELLINGTON, Friday. "Sir Joseph Ward had something to do with the State Advances Department, and the effect of it was to inflate land values. It is impossible to say that this huge borrowing programme which he has announced as his party’s goal could have any other effect,” sa'd a prominent financier to-day when asked to comment upon the United Party’s proposed £70,000,000 loan.

“It is all the more curious to read in a nether part of his speech the fact that Sir Joseph is of opinion that we must never again permit inflated values of land, such as ruled a few years ago, to be a barrier in our path. The result of huge sums of cheap money, such as he proposes to make available, no matter how carefully any Government attempted to administer it, could only be to encourage men to take more interest in the land—but such an interest as would inevitably lend to land speculation on a scale as large as, if not larger, than that of a few years ago. If such a state of affairs returned it would need only one sharp turn of the world markets against us and in a few years we should be in a parlous position indeed. “At the moment, despite assurances to the contrary, the financial position of the Dominion is not as sound as we might wish It. I am going to put the old question: What would happen if we were to stop borrowing? Sir Joseph Ward’s remedy, that of piling up our debt at an alarming rate, is no remedy. In addition, if land development is to be pursued intelligently, it must be done at a steady rate, so that our increased production may be adjusted to our market. “Break-neck speed can only react against us. Look at it this way: If we had half our area composed of flrst-class lane, and were to throw it open and bring it into a productivity, within a year or two our labour would turn against us by lowering the price of our products in the overseas markets. The newlyopened land would be acting competitively against the older land in the export trade. “The scheme as outlined is precipitate and dangerous. It holds out the glamour of cheap money, but does not guard against the troubles which cheap money brings in its train. And its lower rate of interest is, on the whole, illusory, for inflated values will sharply teach the farmer that he has not made a good investment.”