GOVERNMENT BORROWING

Waikato Times, Volume 124, Issue 20820, 2 June 1939, Page 6

GOVERNMENT BORROWING

As was generally expected, the New Zealand Government’s internal loan of £4,500,000 hfis been fully subscribed. Although the details are not yet available, the response seems to have been very satisfactory, and the Government has reason to be pleased with the results of its testing of the market. Probably the whole of the loan will be required to finance projects to which the Government is already committed, and if the present programme of expenditure is to be continued, the announcement of a further loan may be anticipated in the not distant future. It was understood when the last Budget was submitted that of the proposed public works expenditure of over £20,000,000 something like £14,000,000 would come from loans.

The raising of the interest rate has had a marked effect on local body as well as Government loans. Dunedin city loans of £35,000 and £10,500 were promptly subscribed, and it is evident that considerable sums are available for investment at the market rate. Many local bodies whose financing has been impeded by the Government fixing the maximum interest rate at 3$ per cent, will promptly appear on the market with large issues, and in the near future the investment field will be thoroughly explored. Whether sufficient surplus funds will be available to meet all demands remains to be seen.

Any amount of internal borrowing will not, however, ease the overseas exchange position, which is the most immediate eause of concern to the Government. No doubt Mr Nash during his visit to London will explore the possibilities and the advisability of raising a loan overseas. The prospects of the conversion or repayment of the loans of £17,000,000 are being discussed in London, and it cannot be said that the outlook for a transaction favourable to New Zealand is particularly bright. It is all a matter of the Dominion’s credit, and it is impossible to avoid the conviction that Britain looks upon New Zealand’s “experimental” financial, economic and social policies with at least some doubt. Mr Nash carries a tremendous responsibility, and upon the skill with which he handles the situation a great deal will depend. New Zealand investments are not being sought with enthusiasm in London, and it is possible that the transactions necessary to meet the loan falling due at the end of the year may involve a substantial addition to tbe country’s interest bill.