The Press MONDAY, APRIL 22, 1957. Overseas Trade In Balance

Press, Volume XCV, Issue 28258, 22 April 1957, Page 10

The Press MONDAY, APRIL 22, 1957. Overseas Trade In Balance

The small surplus of £764,000 in New Zealand’s overseas

exchange transactions last financial year is satisfactory up to a point. It is certainly better than the trading deficit of £ 16,000,000

in the previous year; and, according to the Reserve Bank’s announcement, the effect of higher wool prices has yet to be felt, so that the actual

improvement may be even greater. The picture will be clearer at the end of the export year in June, when overseas assets should be a good deal above the present level of £90,000,000. It would be easier to be confident about this if the Government had ended the year with the surplus for which it budgeted instead of a possible deficit. This fiscal relaxation has worked against the credit squeeze, which is probably not now as effective in checking imports as it was a year ago. In the meantime, higher wool prices have. introduced a new complication. While they give New Zealand, as a nation, a welcome increase in its income they also increase the incomes of sheepfarmers to an extent that could be inflationary. A continuation of last year’s recovery in the trade balance, even on a more gradual curve, would be satisfactory, although it would not greatly increase the Dominion’s holding of over-

seas assets. The preservation of so even a balance as that achieved last year would be extremely difficult even if it were desirable; and the prudent course for this country is to use the present opportunity to strengthen the overseas reserves in the present year. The situation does not call for any relaxation of the credit squeeze, but rather for its reinforcement by a prudent fiscal policy. In an election year this must mean a real effort by the Government to keep its spending to the lowest possible level. No doubt the Minister of Finance (Mr Watts) is fully conscious of the need to prevent any reversal of last year’s general trend by a repetition of overspending by the State. If the Government can also restrain its own heavy demand for imports, which rose by nearly £4,000,000 last year, it will make a useful contribution to a more reassuring balance of payments. Private imports were reduced last year; but it would not be surprising to see them increase again this year in sympathy with the rise in export income. The building up of overseas reserves to a safer figure is desirable if the New Zealand economy is to expand soundly without undue reliance on overseas loans or interference with the normal development of trade and commerce.