THE H.B. TRIBUNE FRIDAY, MAY 31, 1929 LOAN MONEY INTEREST

Hawke's Bay Tribune, Volume XIX, Issue 138, 31 May 1929, Page 4

THE H.B. TRIBUNE FRIDAY, MAY 31, 1929 LOAN MONEY INTEREST

Among yesterday’s London messages was a very brief one that was perhaps not given the prominence which its significance deserved. This had reference to the twelve million loan recently put out by tho Commonwealth Government by way of conversion and redemption of Queensland’s indebtedness in London falling to be met in July next. This renewal, so far as the lenders are concerned, is being effected in the name and upon the credit of tho Federal Government. This is pursuant to the arrangement made by it with the State Governments that all State loans should be issued through tho central authority and so get the benefit of its backing. But, in spite of the undoubted security thus submitted, wo arc now told that the loan failed by nearly two-fifths of its amount to find public subscription, the underwriters guaranteeing flotation being compelled themselves to take up that proportion. Tho import of this unsatisfactory result is emphasised by the terms upon which the loan was issued. These meant an over-all return to investors of something better than 5j per cent., which, by tho time all expanses are deducted, will mean little short of 51 per cent, to the borrower on tho net amount realised. This, it is to bo noted, is after the loan had been before tho public for something like four weeks, tho date of closing being postponed, possibly in hope lhat the result of the Queensland general election would have a beneficial effect. . It is only a week back that we had another London message giving us the terms upon which a three million loan was being offered by the Bank of England for the Central Electricity Board of the United Kingdom, thus providing undoubted security. Here, again, we have terms that furnish an over-all return to investors running well over 5 per cent.

What we here in New Zealand have to consider is the bearing of the figures we have given upon the heavy borrowing transactions involved in our own Government's declared programme- This, as most folk now know, includes the making of arrangements before the end of this year to secure, during the next three or four years, some ten million for railway construction and, during the next ten years, sixty million for advances to settlers and workers. This

latter amount, it has been promised, trill be obtained on such terms that it will be available for lending out at 4f per cent, without costing the taxpayers of the country a penny. Even giving in that the credit of this country is regarded in an appreciably better light in London than is that of our Australian neighbours, the figures we have cited would seem to indicate that very considerable difficulty will be experienced in fulfilling the pledge that has been given. Something for the immediate future may depend upon the outcome of yesterday’s general election in the Old Country. If a stable non-Socialist Government is assured, it may be fully expected that the reorganisation and expansion of industries which have been coming into evidence will continue with accelerated pace. Should this be the case, then a great deal of fresh capital will bo wanted to meet home require ments, thus seriously restricting the amdunt available for lending abroad. On the other hand, should the election leave matters political either in a state of doubt or with a Labour Government in power, then there is almost sure to be some hesitation about putting money into industrial investments, so leaving more for sending across the seas. Still, even so, there seems little prospect of there being any such a fall in interest ratps as will admit of any such arrangement being established as that which has been promised before the end of the year.