8.-^6

XL

interest payable in New Zealand on the increased debt is 52-40 per cent, of the total, so that, whatever sacrifices were necessary in subscribing our loans, we have the satisfaction of knowing that the money and its earnings are circulating in our own country. If the present total debt had maintained its old proportions held in Great Britain it can readily be seen how much greater our difficulties would have been during the last few years with an unfavourable trade balance in process of adjustment. Under the power to cancel securities given last session I expect to be able to make arrangements which, when completed, will have the ultimate effect of reducing the public debt by approximately £5,000,000, including War Loan redemptions. This I propose to do by utilizing a portion of the accumulated surpluses and balances held by certain loan accounts which are now in a position to redeem some of their own securities. When these operations are completed the annual saving to the Consolidated Fund will exceed £30,000. Honourable members will find included in the tables to the Budget a statement of assets held and capital expenditure as against the public debt at the 31st March, 1922, together with supporting schedules. The tangible assets amount to £44,122,079, whilst the total expenditure on railways, public buildings, telegraphs, electric power, &c, amounts to £85,989,788, for which the Dominion holds good value. The estimated value of Crown lands is £25,750,000, State forests £37,909,875, and in addition a sum of £18,920,325 has been expended on indirectly productive services, which may be set off against the debt. The debt transactions are fully set out in 8.-l [Part ll].SINKING FUNDS AND PUBLIC DEBT. The accumulation of sinking funds for the extinction of the public debt of the Dominion, excepting that portion which has special sinking-fund provisions, is provided for under the Public Debt Extinction Act, 1910. This Act requires an annual payment to be made out of the Consolidated Fund to the Superintendent of the State Advances Office, which, if invested each year at compound interest, would in seventy-five years provide a fund equal to the debt. For the purpose of arriving at the annual payment the average net earning-rate for the preceding three years is taken. The present rate of the annual sinking-fund payment is equivalent to about 0-2 per cent, of the debt. The amount of the debt under the Act for extinction purposes at the 31st March, 1922, was £114,484,456; the annual payment for the last financial year was £203,132, and the total amount of the sinking fund accrued £2,313,330. Included under the above Act are the following loans : Local bodies' loans, £3,453,100 ; old war and defence loans, £3,995,000. Sinking funds relative to these loans, amounting to £992,291, had been accumulated by the Public Trustee up to 1910, and, in terms of the Public Debt Extinction Act, are to be held by him until the debt is extinguished, and then paid to Public Account. Since 1910 no further payments in respect of these sinking funds have been made to the Public Trustee, the necessary provision being made in the total under the Public Debt Extinction Act. The interest earned by the older sinking funds, which remain invested with the Public Trustee, is paid annually into the Consolidated Fund. The Public Trustee also holds sinking funds amounting to £138,020 relating to old loans raised under the New Zealand State-guaranteed Advances Acts, but which, are now provided for by the Public Debt Extinction Act. The sinking fund in connection with the late war debt of £81,843,543 is provided for by section 6 of the Finance Act, 1918 (No. 2), which requires a payment out of the Consolidated Fund of 1 per cent, on the total war debt to be made annually to the Public Trustee. It is estimated that this annual payment will extinguish the debt in forty years, assuming an investment rate of 4-J per cent. Included in this debt is an amount of £26,000,000, which is now in the process of " funding" with the Imperial Government on a 6-per-cent. annuity basis, and which, when completed, will have the effect of separating this portion of the loan from the Dominion sinking-fund operations.