ECONOMIC SURVEY PRESENTED

Press, Volume XCIX, Issue 29251, 8 July 1960, Page 15

ECONOMIC SURVEY PRESENTED

Increase In National Income Forecast (From Out Parliamentary Reporter) WELLINGTON, July 7. Preliminary forecasts indicate a substantial increase in national income for 1959-60 as compared with the previous year and, given the continuance of a stable international situation, the outlook for the 1960’s offers a prospect of sustained economic progress, according to the Economic Survey presented to the House of Representatives this afternoon by the Minister of Finance (Mr Nordmeyer). The rising population will lead to a steady growth in the labour force. This will provide a basis for the further development of New Zealand industry which is already gathering momentum, says the Survey.

“During the first quarter of 1960 retail turnover was 17 per cent, above the comparable period in 1959. For the first five months of 1960 payments for private imports were 23 per cent, higher than in the corresponding months of the previous year. This addition to the supply of goods available will assist in meeting the higher level of internal demand, and in maintaining the relative stability in prices, which has been a welcome feature of the last year. "It is important that the increasing pace of economic activity should not develop to a stage where the level of demand places an undue strain on the resources available. There are signs that this may already be occurring; for example, the shortage of skilled and semi-skilled labour is increasing. Further increases in demand would have an impact on costs, prices, income levels, and the balance of payments. “At the present time export prices measured in relation to import prices are about equivalent to the average for the past decade and our reserves of overseas funds have improved greatly. If this satisfactory external situation can be matched on the internal side by avoiding domestic inflation, the requirements* for sound economic progress in the company year should be met.” Movements Over Decade

Of the past decade and looking into the future, the Survey says: "The rate of economic growth in New Zealand over the last decade has been appreciably less than that attained in many other countries. In making such comparisons it should be remembered that national income per head at the beginning of the decade was high and that present average living standards in New Zealand are still among the highest in the world. “The number of people gainfully employed has declined as a proportion of the total population and there has been a corresponding proportionate increase in the economically dependent section of our people. “In spite of substantial gains from migration, the labour force increased by only 21 per cent, during the decade compared with a population rise of 25 per cent. A stage has now been reached where this trend will be reversed and it is likely that during the next decade the labour force will Increase at a slightly faster rate than population. This should lead to a rising level of output per head of population. Economic Growth “More rapid economic growth could also be accomplished if our rate of capital formation were raised. The rate of capital investment is still less than in a number of other countries. A pre-requisite for a higher level of investment would be a willingness on the part of the community to save more and consume less of our rising national income. The level of savings in the past decade has been retarded to some extent by the trend towards a more even distribution of incomes. This tended to lead to higher levels of consumption.

“Another factor has been the concentration in investment activity in background capital projects which do not produce an immediate and direct return in a rising output of goods and services. However, the attention given during the last decade to investment in such projects may well provide a sound structural basis for accelerated expansion of directly productive plant, buildings, and capital equipment in the years ahead. “In future policy formation increased emphasis should therefore be given to encouraging investment of a type which will directly increase the productive capacity of industry.” says the Survey. “Although the level of world prices is largely beyond our control, our economic policies must be designed to limit the impact on the economy of export price fluctuations. The most effective means of doing this is to build up and maintain adequate reserves of overseas exchange. “These can be used in difficult periods, supplemented if necessary by overseas borrowing, to avoid sharp cuts in imports which can have far-reaching repercussions on living standards, business activity, and the level of employment

Avoiding Inflation “The conclusion which emerges from the review of economic policy measures over the past decade is that mors might have been done to achieve a steadier trend of economic growth. This would have required the maintenance of a more adequate level of overseas reserves and greater emphasis on policies directed towards the avoidance of inflationary pressures. “A greater awareness of these problems would facilitate the adoption of policies likely to lead to their solution with maximum advantage to all sections of the community. “Given the continuance of a stable international situation, the outlook for the 1980’s offers a prospect of sustained ecnomic progress. The rising population will lead to a steady growth in the labour force. This will provide a basis for the furtberdevelopment of New Zealand industry which is already gathering momentum. ' . “Even if we achieve a substantial diversification of our economy in the decade ahead, we will remain dependent in a large measure on the earnings from agricultural exports for supplies

of imported goods, especially capital equipment and raw materials. "For this reason every effort must be made to enlarge and diversify markets for our export products and to persuade other countries to moderate their policies of agricultural protectionism. “Unless this Is achieved New Zealand’s competitive advantages as an efficient producer and exporter of livestock products could be nullified by a lack of reasonable marketing opportunities. “The international recognition already being given to the benefits which accrue from a high and expanding level of world trade, in which both the industrialised and the primaryproducing countries can participate, is an encouraging sign for the future.”