The Press FRIDAY, JULY 3, 1959. Economic Survey

Press, Volume XCVIII, Issue 28937, 3 July 1959, Page 10

The Press FRIDAY, JULY 3, 1959. Economic Survey

The Economic Survey tabled in Parliament by the Minister of Finance (Mr Nordmeyer) is so admirably objective that it leaves some important matters rather in the air. It gives an excellent account of last year’s balance-of-payments crisis and of the policies adopted by the Government to meet it. These included not only heavy overseas borrowing but also fiscal and monetary measures designed to reduce the internal demand for goods and services of most kinds. The real danger to employment, the survey notes, was not insufficient domestic demand (which could be stimulated if necessary) but a possible shortage or uneconomic use of imported raw materials. It is no part of the survey’s purpose to discuss the contrary effects of higher family allowances or subsidised housing, though the existence of these inflationary factors is duly reported. This is a concise study of a sharp but brief depression, illustrated by relevant statistics, and it ends on a note of confidence: “We have there- “ fore come through a difficult “ period with our productive “capacity unimpaired and with “ the economy in sound condi- “ tion for further advance ”, If all political activity could be conducted with the sobriety of the Economic Survey we could, indeed, confidently accept that estimate.

Because of its neutrality, the survey leaves it rather an open question whether the broad policy last year was necessarily the best one, or whether it provides a pattern to be followed next time a similar reversal of the terms of trade troubles New Zealand. For example, is the complicated, inefficient, and expensive paraphernalia of import licensing the best way to

reduce imports? The survey does not notice that question. But lower farm incomes and the fiscal and monetary discipline that reduced internal purchasing power must also have reduced the demand for imports, possibly to the point where the much simpler method of exchange control would have sufficed. As to the future, the survey offers less guidance than the annual report of the Audi-tor-General (Mr C. J. Atkin), who is under no obligation to water down his views. The Economic Survey suggests a minimum overseas balance of £lOO million, presumably to be built up by the methods adopted last year. The Auditor-General has more concrete 'ideas. He proposes a return to the principle of the reserve fund laid down in 1907, with the aim of having £2O million invested overseas. This could be obtained by setting aside £1 million a year from the Consolidated Fund. Neither the Public' Accounts nor the overseas balance would be affected seriously in any particular year but a worthwhile emergency reserve would soon be provided. Similarly, the Audit Office has contended for several years that a greater part of the Earthquake and War Damage Fund (now standing at about £-20 million) should be invested abroad. Together these funds would be a useful reinforcement for ordinary commercial balances at times of stress, permitting the Government of the day to apply corrective measures more gradually than was deemed necessary last year. Taken together, the two reports show politicians what they should do to avoid violent upsets in the economy. It is, of course, the privilege of politicians to decide how much notice they will take of the advice.