The Daily News. FRIDAY, JULY 1, 1921. THE FIVE MILLION LOAN.

Taranaki Daily News, 1 July 1921, Page 4

The Daily News. FRIDAY, JULY 1, 1921. THE FIVE MILLION LOAN.

The announcement of the issue of a five million loan to the New Zealand Government sets at rest all speculation as to how the Dominion’s financial position is to be relieved. The terms offered are about what might have been ey. pected—six per cent, interest and a minimum price of ninety-six. In the present state of the money market these terms may be considered as advantageous to the Dominion, but the test of their attractiveness to investors has yet to be decided. Possibly some surprise may be felt at the modest amount to which the issue is limited, but it must be assumed that Mr. Massey has carefully sounded the financial authorities, and that he was also desirous of not detracting from the prosperity and soundness of the country by asking for a larger sum. While giving him every credit for his good intentions, it may fairly be asserted that had he been guided by the actual needs of the Dominion in the matter of urgent public undertakings he would have met the wishes of those concerned far more by making the amount of the issue ten instead of five millions, one moiety being’ devoted to the urgent needs of the Government, and the other being available for the equally pressing requirements of public bodies. It will be noticed that currency of the loan is either fifteen or thirty years, at the option of the Dominion Government. Assuming that the shorter term will be adopted, at the minimum price of issue, the cost, including the loss of four per cent., and the interest on the loss, would be under £llO,OOO. plus the expense of raising the loan, so that it is a far better paying proposition to the Government than would be a six and a half per cent, loan at par for a similar period. Making the loan repayable at the option of the borrowers in fifteen years is adopting a’ directly opposite course to that which the Treasury authorities insisted upon in the case of the New Plymouth hydroelectric loan, and it may fairly be claimed that what is advisable in the ease of a Government loan should equally apply to a municipal loau, so that there can no longer be any excuse for the Department to withhold sanction of the New Plymouth Borough’s application for a Government guarantee for its hydro loan, which is

even more gilt edged than the Government’s, for the reason that it has the guarantee of a special rate, as well as the backing of the Government. If five millions can be raised for the Government on the terms announced, there should be no difficulty in obtaining a similar, or lesser, sum for the revenue producing loans required by certain of the municipalities. Experience ha,s proved that it is easier to obtain a large loan than a small one, so that it would seem a good plan for the Government to group the soundest and most urgent of municipal requirements of the nature indicated and place the total of the issue on the market, if, as is to be hoped, the Government’s five million loan is a success. These bodies are practically deputies for the Government, and are certainly entitled to all possible assistance in carrying out public works for the benefit of the community. Unfortunately this help has not been forthcoming in the past as freely as should have been the case; rather have obstacles been raised. This is wrong iu principle, and not conducive to the progress of the country. Let us hope better and wiser counsels will prevail henceforth . Meanwhile a certain measure of relief will be felt at the prospect of the advent of overseas capital to the Dominion, as it will be a valuable factor in solving the unemployment problem, besides permitting the execution of public works that are sadly in arrear. The addition of £300,000 to taxation Tor paying interest will not be a very serious item, but it will materially emphasise the need for drastic economy, which was so strongly voiced at the recent meeting of the Wellington Chamber of Commerce. The Government will be well advised to take serious heed of the general outcry against the excessive cost of administration, for there is no factor which has a greater influence on the life of a Ministry than that of extravagance in times of depression. What the public require is not mere talk of reducing expenditure, but determined action, and nothing less will satisfy.