N.Z. Payments Position Seen As Precarious

Press, Volume XCVI, Issue 28436, 16 November 1957, Page 12

N.Z. Payments Position Seen As Precarious

(N.Z. Press Association—Copyright)

(Rec. 11 p.m.) LONDON, November 15. The precarious balance between external spending and receipts, which New Zealand had managed to maintain during the last year or two, was in danger of being undermined by the weakness of world commodity prices reducing export earnings, just when spendings abroad were rising, the “Financial Times” said today under a headline “Trouble Coming for New Zealand.”

The newspaper’s banking expert, “Lombard.’’ said that though there was at the moment little cause for alarmist talk, it could not be denied that New Zealand’s payments position was beginning to cause concern. New Zealand had succeeded in eliminating a serious deficit which developed in the second half of 1955. But she did not manage to achieve any considerable surplus —at the end last June gold and foreign exchange holdings were exactly at the same level as a year before. She was not therefore in any position to weather a major setback in the external field, the “Financial Times” said. New Zealand's fortunes had been deteriorating in a number of ways in recent months. The worst blow had fallen in trade, where import spendings have been rising because of increased internal spending power, while export earnings had been adversely affected by the falling world prices of wool, dairy produce and meat. Trade Figures The net falls in trade figures for the first three-quarters of this year compared with last year were £4m, £sm and £2Bm, the “Financial Times” said. This trend had been made harder to bear by the British Government's more stringent monetary policy. This had imposed new stresses on the capital side of the country’s balance of payments. Tighter money conditions in Britain have tended to slow the flow of capital from Britain into private capital developments in

New Zealand; it has also made it difficult for the New Zealand Government to raise new loans in the London market for financing official development outlays. Reverse Difficult It was difficult to see how the trend could be reversed in the period ahead, the “Financial Times” said. It seemed likely that unless the Government took corrective measures the drain could be considerable, if export prices fell further or did not recover. It was questionable whether the New Zealand Government could now adopt a still tighter monetary policy without risking a large internal business recession. The next Government might find itself, whatever its political complexion, urged to resort to direct restriction of imports to deal with the payments problem, the newspaper said.