July 28, 1949
Mr. Walter Nash, Deputy Prime Minister and Finance Minister of New Zealand, called me from San Francisco today, on the eve of his departure from this country for New Zealand. He was on his way back from the Commonwealth Financial Discussions in London. He said he had not had time to come to Washington, but there were one or two matters he would like to put up to me, from the New Zealand point of view, on which he was not asking action, but would like my personal views as to the expediency of the suggestion he would make. He emphasized that this was a suggestion he would still have to put up to his own people for their agreement.
He pointed out that New Zealand would have to curtail the use of dollars because they had been using the London pool dollars. They could not build up a sufficient balance of their own, their deficits in 1947, 1948, and 1949 to date having been $52,000,000, $31,000,000, and $41,000,000 respectively. This deficit had been made up from the London pool. They hoped to make some more dollars by diverting some New Zealand goods here, but the curtailing of buying was, in his opinion, only a temporary expedient and would accentuate the problem rather than help to solve it. With this last I said I agreed.
The suggestion he made was that, instead of borrowing in London, as had been the past practice, New Zealand, might if he could get agreement there borrow from the United States. He pointed out that in the past 14 years - since he had been Finance Minister (?), they had been paying off debts and had borrowed only to convert old loans, without increasing their debts, and not to raise new money. The last loan they had sought had been heavily oversubscribed; the previous one at the time of the Berlin trouble but before the Air Lift started was not oversubscribed. The condition which he said would be attached to seeking a loan from the United States, was that it must be at no more than they had been paying in London - 3% at par, without heavy commercial charges. The suggestion as to amount which he would make to his people was $100,000,000, which he said would be sufficient to cover any shortage for at least three years, (during which time he hoped that they could come near to achieving a balance by sending more goods to the United States. He also said that he would like the loan to be on a time schedule basis; that is that the loan terms would not contemplate repayment of the total sum at one specific date, but that it would be repayable $10,000,000 a year for 10 years.
I asked him if he contemplated borrowing through commercial channels, to which he reiterated his concern that the loan should not be at higher than 3% interest, and without what he understood were the usual high commercial charges for such loans in the United States. He mentioned incidentally the possibility that he would borrow here and pay off in London.
I told him I would think this over and let him know what my personal views were and that I understood the tentative nature of his suggestion before he had informed his own people.
In addition to this suggestion, he said he had a further point, which was to tell me that the widely held opinion at the Conference was that, while the long-term solution of the problem will take a great deal of thought before any solution can be arrived at, an intermediate solution was investment by the American people, which he thought was the only way to get rid of the surplus of exports over imports.
DA
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