DEBTS & RESOURCES

Wairarapa Times-Age, 17 June 1938, Page 7

DEBTS & RESOURCES

NEW ZEALAND’S POSITION & PROSPECTS VIEWS OF FINANCIAL PAPERS IN LONDON. BONDHOLDERS SAID TO BE UNEASY. LONDON, June 16. Prejudice alone does not account for the fall in New Zealand stocks, declares the “Financial News.” The Dominion’s willingness to meet its obligations is not questioned, but the City doubts its ability to pay when the burden of increased spending encounters lean years. Mr Savage’s talk of a whispering campaign shows ignorance of the psychology of bondholders, who are naturally uneasy as to what will happen when the revenue begins to contract, especially as the Government’s schemes involve an increase of 70 per cent in expenditure. Compared with 1934-35, the dangers of a really sharp fall in the trade balance are considerable, and Mr Savage’s statements concerning the Government’s plans in the event of a depression savour strongly of pumppriming, and lend colour to the rumours of a devaluation of the New Zealand pound. The “Financial News,” however, considers that, even if a bad period of commodity prices is ahead, New Zealand should not have overmuch difficulty in maintaining a safe margin of exports over imports. There is no evidence at present that New Zealand will be faced with a return of the conditions of 1930. The Dominion’s public debt is not heavy for a young country. Mr Savage, however, should remember that unless New Zealand’s credit improves before January, 1940, he may have to pay dearly for conversion. Summing up. the "Financial News" considers that the strength of New Zealand’s economic position is most satisfactory. The risk is essentially political, inasmuch as Mr Savage has more or less repudiated the idea of serious financial retrenchment, which in difficult times, is ever necessary and desirable. There is no valid reason why, however, even in a protracted period of low commodity prices. New Zealand should allow herself to get into difficulties in respect of her debt service.