Economist Predicts Severe Crisis

Press, Volume C, Issue 29435, 10 February 1961, Page 14

Economist Predicts Severe Crisis

(From Our Own Reporter) WELLINGTON, February 9. A warning that New Zealand was facing a serious economic crisis was given tonight by Mr A. J. L. Catt, senior research officer in the New Zealand Institute of Economic Research. Mr Catt was speaking in a panel discussion, open to the public, which was held by the New Zealand Association of Economists. Mr Catt defined a crisis as a situation where the Government had to take action that would be unpopular and which, if not carefully carried out, would lead at a later date to unemployment. The need for action was urgent, he said.

Last year New Zealand spent mor# than its income and overseas reserves were seriously reduced. “We now have to arrest this deterioration and reverse the trend,” he said.

The action taken would need to be of considerable magnitude arid should be spread over as wide a field as possible—"not just fiscal policy or monetary policy or hirepurchase changes or altering the exchange rate.” He considered that devaluation was the last measure to be considered. “The longer the situation is allowed to drift the more likely it will be that unemployment and other difficulties will result" he said. Mr Catt urged the followicg measures:— Frequent, small Government loans at higher interest rates. Raising the trading banks’

reserve ratios and keeping the banks “in the red,” but with an incentive to reduce their advances. Overseas borrowing on as large a scale as possible. In conclusion Mr Catt said that early action was needed, and that the community must accept these measures willingly. “If every section of the community tries to put it on to the other fellow we are all going to be worse off.” he said.