N.Z. FUNDS IN LONDON

Press, Volume XCVII, Issue 28493, 24 January 1958, Page 12

N.Z. FUNDS IN LONDON

Decline Reviewed By Mr Watts (New Zealand Press Association) WELLINGTON, January 23. The factors contributing to the fall in New Zealand's funds in London were reviewed in the House of Representatives to-night by the Minister of Finance in the National Government, Mr J. T. Watts (Opposition, Fendalton). Mr Watts said that in recent years income had been high because of increased production and higher prices, but on the other hand expenditure had been greater because of the greater internal demand due to an increasing population. The population had increased by approximately 300,000 during the last eight years. Another factor affecting expenditure was the increased cost of goods from overseas. Money spent during recent years to provide capital goods was needed to put New Zealand in good heart, he said.

There had been a drop in prices for primary produce overseas. The drop in wool alone amounted to £8 million or £lO million. In recent months, there had not been more than about £500,000 of luxury spending and that was very little when the total imports amount was considered. The great bulk of the imports in recent years' had been raw materials for manufactures and capital goods for the Government and industry in New Zealand. • The real cause of the rise in imports was the possibility of a Labour Government 'coining into power, said Mr Watts. Since July, imports rose by £2 million to £3 million a month more than in a non-electioh year. The Labour Party brought that about by their speeches during the election campaign. It was after the election that the rapid rundown occurred from £57 million or £6O million to about £45 million. Capital Shifted When there were so many rumours of possible action and an ominous silence by the Government, the business community knew something was brewing and there capital was moved from New Zealand. Lavish promises made by Government speakers also had an effect on the exchange position. Such speeches stimulated Christmas buying. But the most important cause of the present financial position was the late season in New Zealand. It was one of the latest seasons the country had experienced for many years. Produce now was only starting to move. Sales of New Zealand’s produce overseas would swell the exchange funds in the next few weeks and months. If the Labour Government persisted in import control, while increasing the internal spending power, the position would become aggravated, said Mr Watts. There should be an increase in the credit squeeze and the Reserve Bank ratio should be increased. The last three years had seen a reasonably stable position in New Zealand; but events at the present time could mean '■uch inflation that there would a return to price control, wages control, rent control and many other controls. Those things would not have occurred had a National Government been in office. “We could, and would, have dealt with the situation by a continuation of our past policy,” he added. “The present Government should continue with a policy of credit restraint. There should be also exchange control or exchange allocation of consumer goods, which is better than import controls.” Defence Fund When the National Government went out of office, Mr Watts said, it had a Defence Fund of £lB million or £l9 million. That had been taken out of. the overall amount of overseas exchange in recent years, but that sum should be added to the exchange fund. It should be kept for defence purposes, but it was there to use for the defence programme. “I think the Labour Government should not give up the possibility of borrowing overseas at an opportune time, because we are not saving enough'to pay for our large development schemes such as Murupara. . ' “The present time is not opportune for overseas borrowing but later this year when the position improves the Government should consider borrowing overseas.” said Mr Watts. The Labour Government during its seven or eight weeks in office ; had made no statement on trade expansion. All it had done was to restrict imports which had annoyed New Zealand’s friends overseas and her opportunities for selling her exports overseas had thus decreased, said Mr Watts.