The Press TUESDAY, FEBRUARY 21, 1961. No “Crash” Programme

Press, Volume C, Issue 29444, 21 February 1961, Page 14

The Press TUESDAY, FEBRUARY 21, 1961. No “Crash” Programme

Anyone who had expected a dramatic programme of economic sacrifice from the Prime Minister (Mr Holyoake) last night must have been surprised, and should have been relieved. The Government is not going to attempt a “ crash ” programme to solve all the nation’s problems in a few months but plans to work out the solutions gradually over a few years. With memories of the “ crash" programme that achieved so little in 1958, the publie should be pleased that Mr Holyoake is doing no more than ask them for a steady pull, though perhaps a long one. Mr Holyoake spoke as if this was the deliberate choice of the Government; and in a sense it is. But it should be recognised, first, that the jQpyernment is bound by manj commitments inherited from its predecessor, and, second, that, where it has some freedom of action, the results of drastic action would be, to say the least, undesirable. For instance, a credit squeeze tight enough to wring the Labour Government’s inflation out of the economy would throttle

commerce and throw many out of work. It would also repudiate the implied commitment of the previous Government when it gave licences for a .flood of imports. The circumstances are entirely different from those of 1958, when Mr Nash was able to introduce import licensing to deal with, a crisis in the terms of trade and raise taxation to deal with inflation. Import licensing, with its commitments a year ahead, is now one of the chief problems; and the high level of taxation leaves little scope for additional imposts. How, then, can Mr Holyoake and his Government attack the problem? The direction of the main effort is plain from his address: the State itself must live within its means if it expects the nation to do so. Overspending by the last Government, even with its grossly inflated revenues, was the chief cause of New Zealand’s present difficulties. Again, a “ crash ” programme of retrenchment would pose as many problems as it solved,

although it would be perfectly feasible since the Government has been committed by its predecessor only until the end of next month. If the Government then abolished food subsidies and cut State housing expenditure (£ 53 million this year) by half, it would balance its own accdunts and reduce the over-all national spending to about what the nation could afford. So drastic a blow at housing would, however, dislocate the building industry, and the better course is the tapering-off implicit in Mr Holyoake’s statement That will permit the orderly diversion of displaced labour to industries crying out for manpower. The case for cutting subsidies is rather different, since their abolition would have few economic repercussions. They are , unnecessary' luxuries, benefiting most those who need them least; and cases of hardship, such as old-age pensioners, could be better helped directly. These are not the only fields in which the State could and should practise economy. Most people will be able to tjiink of minor savings, which in the aggregate would be significant. The private sector, too, will have to submit to stricter discipline controlling its disorderly and wasteful growth.. For instance, higher interest rates on overdrafts would reinforce the credit squeeze. The essential point is that, if the Government adopts a policy of gradualness, it must maintain the pressure evenly enough and long enough, without too much regard for pressure groups that think someone else should bear all the burdens.

One further comment should be made. Mr Holyoake’s address was a model in its avoidance of recriminations. Comparison with a statement made earlier in the day by the president of the Federation of Labour (Mr F. P. Walsh) may be instructive. The contrast is heightened if it is remembered that on these occasions Mr Walsh tells only so much of the story as suits him, and at a time that will inconvenience neither political Labour in its electioneering nor industrial Labour in its wage claims.