Official Guide to the Government Court: N.Z. Centennial Exhibition
State Advances Corporation
State Advances Corporation
The State Advances Corporation of New Zealand is an important medium
through which advances on mortgage are made available on the security of farm lands and urban and suburban properties. Although the Corporation as at present constituted is of comparatively recent origin, the foundations of its business were laid as far back as 1894, when it became evident that, in order to accelerate the development of the country, it would be necessary to make some additional provision whereby settlers might obtain finance for land development purposes at economic interest rates.
The passing of the Government Advances to Settlers Act, 1894, marked the inauguration of a series of schemes designed to provide assistance to settlers for the development of their holdings, and, although the original Act has been amended and extended in many directions since 1894, the underlying principle has always been the development of the resources of the country, both from the point of view of production and of social development.
The growth of the system has been progressive throughout the years, and the provision of advances through a State organisation has been extended from time to time to include:—
|(a)||Advances to settlers on the security of farm property for re-financing and development purposes, including an extension of the system under the Rural Advances Act, 1926.|
|(b)||Advances to workers for the purchase and erection of workers' homes, either in rural or urban areas.|
|(c)||Advances to local authorities to finance the construction of roads, bridges, and for the provision of other civic amenities.|
Prior to 1934-35, these schemes were administered by the State Advances Office, a Department of State having a centralised office in Wellington, and, in addition, the Department administered various other loan and investment accounts aris- page 66 ing from other Government activities, including the administration of the Housing; Act, 1919, under which urban and suburban dwellings were erected by the Government for sale or leasing to workers.
A radical change was made in the constitution of the State Advances Office in 1934-35, when a public corporation called the Mortgage Corporation of New Zealand was established by Statute, with a subscribed capital of £1,000,000, of which half was held by the State and half subscribed by private investors in small sums.
The Corporation, which had extensive borrowing powers, commenced to function in July, 1935, and, in accordance with the provisions of the Statute, progressively took over almost the whole of the mortgages held by the State Advances Office, and the Discharged Soldiers' Settlement mortgages held by the Lands and Survey Department. The total value of the assets so transferred was approximately £55,000,000. Mortgage Corporation stock to an agreed-upon amount was issued to the Crown as consideration for these assets, the balance not covered by the issue of stock being treated as a contingent liability of the Corporation to the Crown.
Shortly after it commenced to function, the Corporation announced a lending rate of 41/8per cent, for long-term mortgage finance on the amortisation principle— a new low level which had never before been reached. Existing mortgagors were given the option, subject to certain conditions, of having their mortgages adjusted to this rate.
In July, 1936, the present Government altered the constitution of the Mortgage Corporation and changed the name to the State Advances Corporation of New Zealand. The private share capital of £500,000 was cancelled, and shareholders were fully compensated by the Government, which now holds the total share capital of £1,000,000. The Board of the new Corporation was also re-constituted and now consists of two joint managing-directors who were joint managing-directors of the Mortgage Corporation, the Secretary to the Treasury, and two other directors.
Generally speaking, the newly-constituted State Advances Corporation assumed the powers of the Mortgage Corporation, and important extensions were made in certain directions with a view to providing additional finance to borrowers for specified purposes and under certain special conditions.
In order to encourage the erection of urban and suburban dwellings, and thus relieve the housing shortage, the Government, as a policy measure, authorised the newly-constituted State Advances Corporation to grant loans above the usual lending margin of 66 2-3 per cent. That this policy, as administered by the Corporation, has materially assisted in the acceleration of home building may be judged from the fact that, from the inception of the scheme in 1936, up to August 31, 1939, loans totalling £3,509,462 have been granted to 3849 applicants.
In addition, 11,224 loans, totalling £11,798,031, for general purposes have been granted since the Mortgage Corporation of New Zealand commenced to function in 1935.
The Corporation is also charged with the administration of advances made by the Rural Intermediate Credit Board, which was established by legislation enacted in 1927, and with the provision of further advances to farmers under this legislation on the security of stock and chattels. In addition, the Corporation administers the provision of the Housing Act, 1919, relating to the leasing and maintenance of houses erected by the Government under that Act.
This, then, briefly sketches the history and development of the State Advances Corporation. It remains to be said that, in place of the centralised organisation which originally prevailed, the Corporation has now established branches and sub-page 67offices in 14 centres of the Dominion, and is able to give to mortgagors and to applicants for loans a service which has hitherto not been available.
The following table will show the growth of the organisation over quinquennial periods up to 1935, and the annual growth since then:—
|Fire-Yearly Period.||Advances Made During Period.||Repayments During Period.||Balance on mortgage or other Security at the end of each period.|
|No.||Amount (£)||Amount (£)||No.||Amount (£)|
* Includes 17,658 mortgages, and current accounts amounting to £11,068,874 ex-Discharged Soldier Settlement loans taken over from the Lands Department in 1936.
It is worthy of note that a sum exceeding £103,000,000 has been advanced since the inception of the State Loans Scheme in 1894, while the balance outstanding on mortgages and other securities at March 31, 1939, amounts to nearly £58,000,000. The accumulated repayments over the period of 45 years total nearly £46,000,000. It is evident from these figures that the Corporation (and its predecessor, the State Advances Office) has played an important part in the financial structure of the Dominion, and that the rapid development of the resources of the country has been assisted very materially by the liberal provision of loan finance at economic interest rates. The organisation, has so expanded in the space of 45 years that to-day it is-one of the largest institutions of its kind in the British Empire, a fact which is not generally realised.page 68