Mr Nordmeyer Hints At More Restrictions

Press, Volume XCVII, Issue 28551, 2 April 1958, Page 12

Mr Nordmeyer Hints At More Restrictions

(New Zealand Press Association) • WELLINGTON, April 1. A hint of increased taxation and more restrictions was given by the Minister of Finance (Mr Nordmeyer) tonight. Referring to his forthcoming Budget in an address to the Wellington Chamber of Commerce, Mr Nordmeyer said he could not be expected to reveal in advance how he proposed to correct the present economic situation in New Zealand. But whatever additional restrictions were imposed, and whatever taxes—“if any”—were increased, he trusted that everyone would realise that the Government did not take such steps because it liked doing it. Steps which the Government had already taken were only some of the steps which had to be taken to place the country’s economy on a stable basis, added the Minister.

It was a plain fact that New Zealand’s total spending had been too high, Mr Nordmeyer said. All sectors of the economy had been spending too much. To some such a view might seem reaction, but it was simple realism—the country had been living beyond its means. The country was in a period of slight recession, so much so that some persons wondered whether it would return to conditions of 30 years ago. “I personally don’t think so,” Mr Nordmeyer said, “but that’s only a guess, and I might be wrong.” There was a general uncertainty about the world situation, with 5,000,000 people registered as unemployed in the United States (“I don’t know how many haven’t registered”), 600.000 in Canada, fewer than 500,000 in the United Kingdom, and a “measure” in Australia. It was once thought that if the United States sneezed the rest of the world would catch pneumonia. That was not so now, but uncertainty could have not only a psychological effect but also an economically adverse effect on New Zealand’s economy. Un:ertainty of the world economic situation was one of the two key problems besetting the Dominion’s economy. The other was the difficulty in estimating what the national income and export income were likely to be. “Too Generous” It was with this uncertain background that the Government had to decide on the amount of importing it could allow, and in the light of the subsequent trend of prices it had found that, far from being too drastic in the restrictions, as many claimed, it had been coo generous. It would be wrong to assume that there would be any increase in prices of New Zealand's primary products this year. Prices obtained for butter and cheese meant that New Zealand’s dairy farmers were being paid £22,000,000 a year more than their product brought on the market. The taxpayers of the country would take some convincing that they should find that sum unless the farmers’ price was a bare cost of production. Over recent years farmers had been paying prices for land that were quite out of touch with reality. There could be no suggestion of taxpayers being asked to finance such unreal transactions. There were many factors to be considered in working out an equitable guaranteed price. “We can’t go on using Reserve

Bank credit to finance the dairy industry,” said Mr Nordmeyer. “That’s one of the most inflationary factors.”

Production of all kinds was tremendously important, but it had to be production of the right things. It might be asked whether New Zealand should go on producing butter for a world which did not want it—at least not at the price it was offered. It was of paramount importance for New Zealand to increase production of the right articles this year and in the years ahead. Question of Borrowing

The sudden and drastic fall in primary products prices raised a number of issues, one of them the question of whether the Government should borrow to honour agreements and contracts it had made. If it decided to borrow, it had to consider from whom it would borrow, and under what terms and interest.

Some people looked upon New Zealand’s crisis as a thing of a few months’ duration, but for years the country had been living beyond its means. For years there had been gambling on the maintenance of its overseas prices. As for suggestions that the difficulties were likely to be overcome by the end of the year, Mr Nordmeyer said, it would take many years before the country could build up its overseas reserves to the level which could be regarded as safe.