CAPITAL NEEDS OF N.Z.

Press, Volume LXXXIX, Issue 27131, 29 August 1953, Page 6

CAPITAL NEEDS OF N.Z.

Conclusions Reached

By Economist

MORE INVESTMENT ADVOCATED Without coming to any conclusion on absolute totals. Dr. W. B. Sutch, economic adviser to the Department of Industries and Commerce, in a paper read at the conference on New Zealand’s capital development last evening, said it seemed clear that New Zealand needed more capital investment, rather than less. The latest figure for gross capital formation—23 per cent, of gross national product—was considered high, but Dr. Sutch did not consider it high enough. “Investment has taken a large fraction of the national income, but it has not made up for the lack in the war years. In a physical sense we have been paying for the war and are still paying for the war. Because of this, if for no other reason, we should not regard our physical investment as adequate. “What is adequate depends on New Zealand’s understanding of the problem and the desire to solve it. Unless the terms of trade change very much in New Zealand’s favour, or New Zealand borrows heavily abroad for the next 10 years, the additional investment needed will have to come from savings—that is. abstention from consumption.

“If the present rate of population increase is maintained, by 1963 there will be about 2,469,000 people in New Zealand. or an increase of more than. 400.000 above the present population,” said Dr. Sutch. “This is nearly equal to the combined populations of Christchurch, Wellington, and Dunedin cities and more than the combined populations of Hutt, Hamilton, Palmerston North. Invercargill, Wanganui. New Plymouth, Hastings. Timaru, Nelson, and Gisborne. “It means that the Government must provide for additional schools, hospitals. buildings, roads, housing, bridges, railways, irrigation, aerodromes, harbour facilities. telecommunication equipment, hydro-electric plants, defence and many other items of capital investment.” State and Private Investment

Dr. Sutch referred to a table on gross capital investment appended to nis paper. The table showed private investment, at £15,000,000, to be 43 per cent, of total investment, and Government (including local authority) investment to be £20,000,000, or 57 per cent, of the total. Private investment had increased to 58 per cent, in 1952-53 (having reached a maximum of 63 per cent, the previous year), while the latest figure for Government investment was 42 per cent.

“The heavy decrease in the percentage of public investment is particularly noteworthy,” Dr. Sutch said. “It is desirable that there should be no lag in providing the utilities and services falling within the public province, as full advantage cannpt be gained from private investment unless adequate public investment has preceded it. If there is a temporary expansion of private investment with a consequent restriction of public investment, private investment at a later period may be restricted because of inadequate public facilities. “In relating total investment to available resources, a large part of the problem is defining and carrying out policies in such a way that the potentialities of private investment do not exceed the production limits imposed by public investment.” Dr. Sutch discussed the estimated’ capital needs of the country under the headings he had indicated, translating the estimated population figures into appropriate terms; for instance, the additional demand for classrooms by 1960 would be 5500.

“All societies have the problem of deciding how much of the seed-corn they snail eat. In our case, as with others, it depends on how big we want the harvest to be for our children. If the harvest is the kind that this canital development programme will ,yield. then we should eat less of the seer.' corn now,” Dr. butch concluded. The greatest expansion in New Zea land s history took place before i here was a Reserve Bank at the services of a beneficent Government, sau. M J. Boyd-Clark, in the discussion on Dr Sutch’s paper. Much of the cairiU work outlined by Dr. Sutch could, in his view, be carried out more cheaply by private enterprise. When Mr C. L. Rollo asked Dr. Sutch was the European birth-rate falling, and would not the racial composition of the population be altered by 1960, Dr. Sutch said his figures were obtained from the Government Statistician, who had merely supplied him with the estimate of a total increase of 400,000 in the next 10 years.