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steerage passengers without reducing the calculated space for cargo, so that, as the estimate for cargo is full out and home, the only appreciable improvement in freight would be by getting better rates outward than 70s. for fine goods, or homeward than fd. and fd. for wool, and 455. for wheat. At these rates, however, and for the immediate purpose of this section, it is enough to gay that, according to the freight and passage-money which I have assumed as likely to be got, the total revenue of the year would be from £355,000 to £360,000. IV. Eesttets of the Teae's Wobk. If you now bring together the figures I have given in the preceding sections, you will see that I am unable to come to any other conclusion than that a postal line, established under the conditions I have mentioned, could not only be expected to yield little in excess of working cost, but with management added would leave a deficiency even with, the ships full up both out and home. Nor can I think there is very much danger of error in this view ; for, upon comparing the figures in the scheme of 1878 with those I have here given for a postal service. I cannot see there is much room for either saving in working cost or excess in earnings. On the working cost side, with the single exception of the price of New Zealand coal, which I have allowed for, it is not only impossible to make any saving in any of the figures of 1878, but it is certain that in all the spending departments—the portage bill, lights and dock dues, sailing and loading charges, canal dues, and insurance—a thoroughly-equipped postal service will cost much more for each voyage than was estimated for the two-monthly boats. On the revenue side Ido not see that my estimate can safely be exceeded. On what, then, does the question of subsidy for such a service depend ? And the reply to this must be that it does not depend upon whether a few thousands more can be earned by higher rates of freight and passage-money, but upon how much has to be set apart for boiler fund and depreciation, and how much is wanted for dividend on capital. It is on this that the question of subsidy really hangs. In the scheme of 1878 Mr. Galbraith put down 10 per cent, on the cost of the boats as the necessary provision for depreciation and boiler fund and periodical overhaul; and as to interest on capital he told us that capitalists would not be induced to invest their money in steam enterprises, which are so liable to hazards and vicissitudes impossible to provide against, unless an almost certain prospect could be assured to them of at least 10 per cent, on their capital. I cannot pretend to say how far this statement would stand the test of competition for a subsidy; but of course it is precisely the question that has to be tried. If I have been right in taking the share capital necessary for building the steamers of a postal line at £600,000, in addition to £200,000 raised by debentures (and in giving these figitres I am putting the cost of building at less than would be estimated for a first-class P. and O. boat), then the amount required for a 10-per-cent. boiler fund and a 10-per-cent. dividend to shareholders is not less than £140,000 a year. To this must be added £10,000 a year as interest on debenture capital, and probably another £10,000 a year for cost of the establishments necessary for a proper admistration of the service in England and New Zealand. I have gone into every item of this cost, and, considering the emoluments which men capable for such a purpose can command, I feel sure no great saving would be made in the amount. All this means that, besides working cost of the boats themselves, a sum of something like £160,000 more has to be faced; and it is here that the play of figures will be really found if ever the colony resolves to establish a fast postal service direct. I have no doubt you could get ships built upon a guarantee of 6 per cent, on the capital employed in building them ; that, however, is not the question, because it is not in the construction of the ships, but in the administration of the service, that the risk and difficulty lie : and the same people who would be glad to take an offer of 6 per cent, on the cost of building would not look at it if put in the shape of a sum to cover the risks of establishing and working the service. The first step, therefore, for the colony to take is to divest itself of any idea that it would ever be possible to establish a postal service at even 12! knots, for a subsidy of £60,000: for this sum would leave neither the shareholders nor the deben-ture-holders any return whatever on their capital, and would only give a boiler and depreciation fund of 7| per cent., which is the least that any prudent capitalist would look at if he went into steam at allMERCANTILE STEAM. In the preceding section I have confined myself to a fast postal service : I will now endeavour to apply a like analysis to the question of a mercantile line. I. As TO CoNSTBUCTIOB". 1. Size of Ships. For the postal service I was contemplating a class of ships designed specially for speed. The class wanted for a purely mercantile line would have to be designed rather with a view to large carrying capacity. Assuming new ships to be built for the purpose, I think the class of vessel that would at once be most economical and best subserve the objects of a mercantile service would be one whose dimensions were about 5,200 tons gross and 3,400 net; and such a ship (after allowing space for, say, 200 steerage passengers) would take 4,200 tons outward, and be capable of bringing home a cargo of more than 5,000 tons. This means that such a ship would certainly not cost less than £100,000, and might run up to £110,000. 2. Speed. There being no postal question at stake, it would be sufficient for a mercantile service to steam, say, 10 to 10| knots at sea, and this speed would allow of the outward voyage via the Cape being made in fifty-four days, and the homeward via Magellan Strait in about forty-seven days. 3. Route. The object of my present inquiry being to see what would be the earnings of such a service, so as to judge what subsidy (if any) it would require, I have assumed as one of its conditions that the question of passing through the Suez Canal would have to be eliminated. In that case I suppose there 2—E. 4.