COMMERCIAL OVERSEAS FUNDS

Press, Volume XCVII, Issue 28480, 9 January 1958, Page 14

COMMERCIAL OVERSEAS FUNDS

Need For Adequate Reserves

“Once again, events have emphasised New Zealand’s heed for adequate overseas reserves to cushion the economy against short-term fluctuations in world trade and economic activity,* ’ says the Australia and New Zealand Bank’s current issue of its Quarterly Survey. “International events imposed some strains on the New Zealand economy in 1957; these strains are not fully evident at this stage except in the form of increased pressure on local resources. Important factors have been the continued weakening of world prices of primary produce, and the United Kingdom’s measures designed to strengthen sterling. That these changes should necessitate internal adjustments in New Zealand indicates the fine state of balance previously achieved,” says the Survey. “The terms of trade had already suffered . from a steady increase in wholesale prices of imported producers’ goods and the additional effect of the higher freight

rates now operating. With the increased bank rate stocks of primary produce have become more costly to hold in the United Kingdom, with adverse effects for New Zealand’s export prices. Combined, these factors indicate the likelihood of further pressure on oversea assets; pressure which was offset last season by high receipts for wool. “Unless the strong demand for imports may be attributed to precautionary, pre-election ordering, it seems that the . economy must face another period of readjustment,” the Survey continues. “Undue reliance on monetary policy in the past has probably taken some of the edge off this weapon for further attack upon levels of expenditure. To have recourse to import controls would be to forgo the large measure of freedom of choice achieved in the past three years. Relief might well be sought in a closer examination of fiscal policy, marketing accounts, and expansion programmes.”