May 1, 1930


Total during 5 years



$17,790,555 $257,866,939 At the close of the fiscal year the unmatured funded debt was $2,250,837,336. Of this amount $56,090,000 are held as sinking funds, leaving $2,194,746,563 outstanding in the hands of the public. The debt financing program of the present year will not be a serious problem. There is one maturing loan. It consists of 4 per cent treasury notes to the amount of $45,000,000, and falls due on December 1st. There is, of course, under consideration the much larger question of re-financing the 1933 and 1934 loans totalling $982,000,000, in order that the Dominion may secure the lowest possible interest charges and at the same time refinance without restricting the money credits necessary for the development of Canada. In recent years it has been possible to redeem maturing loans out of surplus revenues, thus immediately relieving the Canadian taxpayer. It is obvious .that the large maturities of 1933 and 1934 cannot be met out of surplus revenues. Careful consideration is now being given to the best method of spreading maturity dates of refunding loans and also to the desirability of broadening the application of the sinking fund principle, so that when these major re-financing operations are undertaken the requirements of this decade, as well as the possible problems of the future, will be met in a sound and comprehensive manner. With the permission of the house, I will now place on record a statement showing the unmatured funded debt held by the public.



The Budget-Mr. Dunning UNMATURED FUNDED DEBT HELD BY THE PUBLIC Maturing dates by years Date of maturity Name of loan Rate Where payable Amount of loan Amount maturing during year% $ cts. S cts.4 45,000,000 00New York. 1931 April 1 Pub. Service Loan 1916. 5 New York- 25,000,000 00 5 52,931,600 00 77 9Hi non no5| 73l32sl150 001Q33 TSTnv 1 5§ 446,659,950 001Q24 Nnv 1 5| 511,910,650 00 3i London 23,467,206 27 525 277 S5fi 27Loan 1915-35 5 '874!000 00New York. 1Q2fi "FVh 1 4 \ 40,000,000 001Q37 TW.. 1 5§ 236,299,8.50 00 5' Canada and 90,166,900 00 New York. 326,466,750 001Q28 .Tnl v 1 3 8,071,230 16 3 18,250,000 00 3 10,950,000 00 July 1 C.P.R. Loan 3* London 15,056,006 66 52,327,236 824$ 75,000,000 005 147,001,100 004 \ 50,000,000 004\ 45,000,000 001Q47 Opt 1 2* 4,888,185 643* 137,058,841 00T .nan 1942-52 5 100,000,000 004 93,926,666 662,250,837,336 39 $ cts. Payable in Canada 1,637,254,300 00 Payable in Canada and New York 136,040,900 00 Payable in New York 165,874,000 00 Payable in London 311,668,136 39 2,250,837,336 39 Less Bonds and Stocks of the above loans held as Sinking Funds 56,090,772 82 2,194,746,563 57


FINANCING OF SUBSIDIARY ENTERPRISES


A brief review will now be made of the financial commitments of the government in the past year in connection with the operations of the Canadian National Railways and Steamships, the several harbour commissions and the Canadian Farm Loan Board. These separately operated bodies receive assistance from the treasury, under the authority of parliament, either directly, in the form of cash loans, or indirectly, by way of the guarantee of securities. The practice, in past years, so far as the public accounts are concerned, has been to treat cash loans which pay interest as active assets and those that are not interest-producing as non-active assets. The guaranteed securities, which are issued in respect of capital investments, are shown in the balance sheet as indirect liabilities. The same course has been followed this year. Canadian National Railways Under the extraordinary business conditions prevailing last fall, particularly with reference to the crop movement, earnings of railways were severely reduced. The accounts of the



The Budget-Mr. Dunning Canadian National Railways for 1929 show net earnings of $36,389,058 available to pay interest on securities in the hands of the public. Interest charges amounted to $45,258,920, the resulting deficit being $8,869,862. This result reflects not only the loss in revenues due to the causes mentioned, but also the increase in fixed charges resulting from the large necessary expenditures which have been undertaken in recent years on capital account for branch lines, terminals, rolling stock, and other additions and improvements. Without going into greater detail, it will suffice to say that the government has paid the amount which officers of the company have certified as being the combined net cash deficit for the railway years 1928 and 1929, and which amounted to $2,932,652.91. The amount paid was greater than the actual difference between the system deficit of 1929 and the surplus of 1928, due to the fact that certain items which take their place in the accounts are eliminated when estimating cash requirements, the most important item being the 1929 surplus on the Grand Trunk Western which is now dealt with separately for financing. The current financial requirements of the Canadian Government Merchant Marine Limited, amounting to $1,628,907.21, mainly for operating deficits, and of the Canadian National (West Indies) Steamships Limited of 8862,389.98, for operating deficits and interest, have also been paid in cash as loans (nonactive) to these corporations. In addition, $4,o26,645 has been paid as a charge on the consolidated revenue fund in respect of the eastern lines, Canadian National Railways, for deficits arising over and above the amount represented by the reductions in tolls under the Maritime Freight Rates Act. The amount, therefore, which the government paid in the past fiscal year as a direct charge on its revenues in respect of these transportation services, is $9,950,595.10, made up as follows: Canadian National Railway Company $2,932,652 91 Canadian Government Merchant Marine Limited 1,628,907 21 Canadian National (West Indies) Steamships Limited 862,389 98 Eastern Lines, Canadian National Railways 4,526,645 00



Guaranteed Securities The guarantee of the Dominion was given in 1929 to bond issues of the Canadian Na- tional Railway Company, aggregating $120,000.000. There were two issues of $60,000,000 each, one dated July 1, 1929, and the other October 1, 1929, bearing interest at 5 per cent and maturing in forty years, subject to prior redemption. The issues were sold by tender to the highest bidder. The proceeds of these flotations were devoted, in part, to the payment of $40,000,000 of temporary bank loans outstanding at the end of 1928. The remainder has been or will be used for capital purposes as voted in the general railway budget or authorized under special acts relating to the acquisition of railways and construction of branch lines and terminals. With the permission of the house, I shall place on Hansard a statement indicating the authority under which these borrowings were made and guaranteed, and the amount of securities issued in each case.


CANADIAN NATIONAL RAILWAY COMPANY GUARANTEED BOND ISSUES IN 1929


Securities Authority issued Railway Loan Appropriation, 1929-30 $ 49,656,805 31 Branch Lines Construction, Special Acts 8,710,609 60 Toronto Terminals Railway Act 232,516 03 Canadian National Montreal Terminals Act 7,300,000 00 Acquisition of Railways, Special Acts, 1929: Quebec, Montreal & Southern Railway 6,198,645 41Inverness Railway 387,415 34Kent Northern Railway. . 61,986 45Quebec Oriental Railway, and the Atlantic, Quebec & Western Railway.. .. 3,615,876 49Northern Alberta Railways. 3,409.254 97Repayment $40,000,000 Temporary Loan, 1928, issued under the Appropriation Acts of 1927 and 1928 and the Canadian Northern Income Charge Act, 1928 (refunding) 40,426,890 40



Reference should also be made to two other guaranteed issues which fall outside the 1929 railway fiscal year but within that of the government. An issue of $18,000,000 4| per cent Dominion guaranteed bonds of the Canadian National Railway Company matured on February 15, 1930, and was provided for by The Budget-Mr. Dunning the issue of a like amount of 5 per cent forty-year bonds, guaranteed under the Canadian National Refunding Act of 1929. Under legislation passed in 1927, an expenditure not exceeding $10,000,000 was authorized in connection with the establishment by the Canadian National (West Indies) Steamships, Limited, of a mail, passenger and freight steamship service between Canada and the West Indies. The cost of five new ships and the expenses of converting vessels transferred from the merchant marine fleet were financed during construction by bankers' loans. As of March 1, 1930, an issue of five per cent twenty-five year bonds amounting to $9,400,000 was made and guaranteed, this -being the amount necessary to provide for the capital cost of establishing the service. The temporary bank loans have been paid off. Both these issues were sold by tender to the highest bidder.


HARBOUR COMMISSIONS


During the fiscal year, the treasury has been called upon to finance capital expenditures of the several harbour commissions, amounting to $10,436,000. Details of the loans made to them are shown in the statement which I now place on record.


LOANS TO HARBOUR COMMISSIONS IN 1929-30


Montreal Harbour Commission. Less matured loan repaid..



Quebec Harbour Commission.. .. Three Rivers Harbour Commission Chicoutimi Harbour Commission.. Saint John Harbour Commission.. Halifax Harbour Commission.. .. Vancouver Harbour Commission..



During the year, the Board of Audit, upon direction of the Treasury Board, made investigations into the financial affairs of the various harbour commissions. Reports have been received from the board and tabled in the house. Some recommendations are made, particularly with respect to provision for sinking funds and replacements, which will have the attention of the government and commissions concerned.


CANADIAN FARM LOAN BOARD


The Canadian Farm Loan Act authorizes the government to provide an initial capital not exceeding $5,000,000 for the operations of the board, and also requires the Dominion to subscribe for capital stock to the extent of five per cent of the loans outstanding. Initial capital paid by the Dominion treasury to the board in 1929-30, the first year of the board's operations, amounted to $2,400,000, and subscriptions to capital stock to $59,023.



The past fiscal year was marked by a decline of $244,000,000 in the value of our visible exports. In the trade between Canada and the countries of South America there were increases in both imports and exports. There was a decrease in the unfavourable visible trade balance between Canada and the United States of $35,800,000 during the fiscal year. There was no material change in the trade with Africa, but both imports and exports decreased between Canada and the Asiatic countries. No appreciable increase is to be noted in the imports from either Great Britain or the European countries, but major decreases in transatlantic exports reduced the visible trade balance with that area. In all, the preliminary statistics for the last fiscal year show imports to the value of $1,248,200,000, of which 429 millions entered duty free. The exports were valued at $1,144,900,000, thus leaving an adverse balance in visible trade of $103,300,000. Canada's largest volume of trade continues to be with the United States. During the year our total imports from that country decreased $20,500,000, as compared with the previous year, while Canada's total exports to the republic increased $15,300,000. The decrease in exports to the United Kingdom and the European countries is apparently in grains. Total exports to the United Kingdom decreased 148 millions of dollars, but during the period our exports of grain to the United Kingdom decreased by 138 millions



The Budget-Mr. Dunning of dollars. The same influences have affected the sales to the continent of Europe. There was, in comparison with the previous year, a decrease of 80 million dollars in the value of our exports to the continent, but the decrease in value of exports of grains amounted to $81,000,000. In consequence, as there are still large quantities of grain available for marketing, it is reasonable to anticipate a gradual readjustment of our trade balance with the United Kingdom and Europe. In comparing the imports from all countries, a large increase is to be found in the petroleum group, owing to imports of crude petroleum having increased 'by over $13,000,000. Another increase among specific groups was in electrical apparatus where imports expanded by over twelve million dollars. Principal import decreases in specific group sections include the automotive vehicle group which fell off by $28,000,000, and farm implement imports by $10,000,000. On the export side three groups show material depreciation. Grains were down $243,000,000; flour exports decreased by $20,000,000, and dairy products by $8,000,000. On the other hand, among the increases in exports are: Farm implement exports, which increased by $2,500,000; exports of paper and its products were up $3,000,000; aluminum and its products $6,800,000; copper and its products increased by $11,000,000 and precious metals by nearly twenty-two millions. A study of the records shows that when cereal crop items are separated, the past year maintained a steady level in volume of exports of goods. It also emphasizes the development in the mining industry, which is demonstrated by a study of the imports of certain classes of mining machinery, which were recently given favourable treatment by this house, and which increased to over $11,000,000 in the period under review. During recent years the growth in production in agriculture, lumbering, mining and manufacturing, has been supplemented by a new activity which is usually termed tourist business. Various estimates are made as to the money spent by tourists in Canada. Some estimate that it was in excess of $300,000,000 last year. The exact amount does not concern us at the moment, the more important phase being the continued growth of this form of trade and its development to a higher standard. We have magnificent national parks and excellent transportation facilities. No country in the world has better hotel service than Canada, and each year substantial additions are made. Attention has been directed recently to the sales opportunity represented by this tourist traffic. Is there any reason why trade in quality goods should not be increased? Many commodities can be purchased in Canada more cheaply than in the countries from which the tourists come. The provincial and the municipal authorities, the transportation companies, and the Dominion government may co-operate and bring tourists to the doors of Canadian shops; after that, success depends on the initiative of the retailer and the maker of the goods offered for sale. With this seasonal influx of eighteen million visitors, it should be our aim to develop an extensive market and thus enlarge the benefits of the tourist trade.


May 1, 1930