Mr Holyoake Sees 1961 As A Year Of Promise

Press, Volume XCIX, Issue 29401, 31 December 1960, Page 14

Mr Holyoake Sees 1961 As A Year Of Promise

(New Zealand Press Association) WELLINGTON, December 30. The year 1961 would be one of promise, challenge and adventure for the young and developing country of New Zealand, said the Prime Minister (Mr Holyoake) in his New Year message. An economy based largely on primary exports must be prepared for market fluctuations from time to time, (mt with the aid of the new sciences and technologies there was great scope for continuing expansion in almost every field.

The Government would play its proper part in endeavouring to create stable conditions for the encouragement of the people’s own initiative and enterprise, he said.

“The new Government has been in office fewer than three weeks but we have lost no time in assessing the country’s general position.” said Mr Holyoake.

“The Ministers have made an estimate of their tasks, and are busy shaping departmental policy into line with the undertakings we put before electors in November. “While there have been some developments giving rise for concern. there is nothing that cannot be put right with the proper action, and that action will be taken in the very near future. “As I have promised the second National Government will encourage in every way possible the inherent New Zealand genius for getting things done. “I have always believed that no Government has a monopoly of wisdom and ideas, and the present Government is convinced that it has most to gain from seeking and encouraging maximum effort and ideas from everyone. Immigration • “New Zealand has two great needs—manpower and development capital. Our natural population increase is substantial, imposing an almost embarrassing load on our education and other services, and creating a need for more and more new jobs for new citizens, but it still does not provide enough human brains and hands to realise our full development potential. The Government is accordingly investigating the availability of suitable immigrants, at the same time bearing in mind the importance of settling and assimilating them without disturbing the economy. “The need for development capital is also under close attention, with due regard to the best use of our domestic resources, as well as the availability of investment funds from overseas. With a correct balance in these fundamental constituents of national development, we can envisage a further expansion of our export and manufacturing industries, extending to the many ancillary services and employment opportunities which flow from major public and private development. Social Security “We are determined to safeguard and maintain our long established social services, in the knowledge that Social Security is most secure when production is increasing solidly and steadily “The Government sees its duty as one of giving the encouragement and leadership essential to an expanding and developing economy, at the same time achieving a balance between encouraging development and avoiding the dangers of living beyond our income.

“Though final figures are not yet available, it is almost 'certain that the net overseas assets of the banking system amounted to less than £7O million, at the close of 1960, compared with £BB million at the end of 1959, a fail of more than £lB million. This occurred despite the fact that our export earnings were very close to last year’s record level. “The main cause of the substantial deficit was a rise of more than £4O million in payments of private imports. Some increase in imports above the 1959 level of £206 million was clearly warranted, but the sharp increase which occurred in 1960 went beyond whgt the country could afford from current export earnings

Export Prospects “While only a tentative forecast is possible at this stage, it seems unlikely that our export earnings for the year ahead will exceed, or perhaps even reach, the 1960 total. So far this season, wool prices have been about 10 per cent, below those realised at the early sales last season. Meat prices improved in 1960 compared with the previous year, but we would be unwise to bank on the possibility of further improvement occurring this year. The outlook for dairy products is adversely affected by rising production in Europe which brings greater supplies on to our main market in the United Kingdom. “It is, therefore, unlikely that, in the absence of overseas borrowing, or the drawing down of our reserves of overseas exchange, we will have as much to spend on imports as we actually spent in 1960 Overseas Loans “To meet this situation, and to build up our overseas reserves, the Government is giving consideration to borrowing overseas in 1961 “It will oe realised, however, that there are limits to which it is advisable to borrow abroad to maintain the flow of imports Such loans must be serviced from our export earnings and repaid at a later date. “The Government’s plans for borrowing-abroad will, of course, be influenced by the terms on which loans can be raised in financial centres, such as London and New York.” The Prime Minister satd the heavy pressure of demand for imports during 1960. particularly during the latter half of the year, was part of a general level of demand which had become excessive in relation to the volume of goods and services available Among the main causes of that situation was the fact that the Government had been spending more than it had been receiving from taxation and borrowing, and financing the deficit by recourse to Reserve Bank credit In a situation where economic resources were fully employed that was directly inflationary “With the aid of further borrowing before the close of the financial year, it is expected the deficit in the Public Accounts could be about £25 million. In

addition, an expansion of more than £2O million has occurred in the total of trading bank lending to private firms and individuals. , “Consequently, we are faced with an inflationary situation in which mounting pressure is building up on costs and prices. By now, perhaps, we are familiar with the nature of the inflationary .process by which the increases in incomes are substantially or entirely offset by price rises, and we have the mirage of a rapidly rising national income when, in fact, only moderate increases are being achieved in the real output of goods and services.

“The Government's aim is to counter the difficulties inherent in the present economic situation by endeavouring to reduce or eliminate, as far as practicable, the basic causes of economic instability. “Obviously, little can be done to influence the terms on which our exports are exchanged for goods from overseas. “Unfortunately, the inflationary situation which exists within New Zealand has resulted in the level of demand exceeding the volume of goods and services available. “The Government will attack this problem on the two fronts — by encouraging increased production and the expansion of services, and at the same time, bringing demand into closer relationship with the goods and services available.

“It is important, however, that our approach to this problem should be gradual, so that any disruptive effects associated with changes may be kept to a minimum.

“It is with this in view that time and effort are being devoted by the Government to a close and thorough study of the present situation, so that the action taken will be soundly based, and consistent with improvements undertaken elsewhere. “Our approach to these problems will be based on the belief that a faster rate of economic growtfi can be achieved by maintaining stable conditions, giving greater scope to the initiative and enterprise of private firms and individuals to produce an increasingly diversified range of goods and services. “This may well involve greater effort, more emphasis on market fortes and competition to secure the best allocation of our productive resources, and a willingness and ability to adapt to change. These are the factors by which we can succeed in raising the living standards of all sections of our people,” said Mr Holyoake.