N.Z. MONETARY POLICY

Press, Volume XCV, Issue 28183, 23 January 1957, Page 12

N.Z. MONETARY POLICY

Bank Economist’s Review

(New Zealand Press Association) DUNEDIN. January 22. Too many persons liked the “primrose path" of inflation, said Mr A. R. Low, economics adviser to the Reserve Bank, in a paper read to the Science Congress today. They would prefer to see it continue, provided it was no more serious than it had been, r ather than face the painful adjustments ’which a return to stability would involve, he said.

After 16 years of over full employment and sellers’ markets and with many commitments made ahead on the assumption of a continuation of these conditions, the business community was not likely to respond to the first feel of a pull on the reins. “As a result of a combination of persuasion and a monetary technique operating to deprive the banks of free cash and placing them persistently in debt to the Reserve Bank, a severe restriction has been placed on the availability of bank credit.’’ he said. Slow Results The results had been slow to appear, but in the period since mid-1955 they had been widely felt. New or increased overdraft limits had been very hard to get, and pressure had been placed on customers, to reduce their overdrafts. The banks had turned down business which in the normal course would have been readily agreed to as good banking and in the national interest. The severity of recent credit restrictions should not be continued for too long. The labour force continued to grow, and there was no evidence that there had been any decline in productivity. On the contrary, said Mr Low. There were signs that the labour force was less inclined to quick turnover and “absenteeism.” Many firms had a full staff for the first time in years, and production could thus run more smoothly. There had been a widespread reduction in overtime in factories, but this did not necessarily mean a reduction in output.

farming, there was evidence that production had not been affected in any significant way. Mr Low said. Some farmers might be reducing their applications of fertiliser or postponing plans for further land development, but the effect was slight and farm production appeared to be continuing its upward trend.