Bank Review Comments On N.Z. Import Boom

Press, Volume C, Issue 29537, 12 June 1961, Page 17

Bank Review Comments On N.Z. Import Boom

Tbe concern of importer* to use their 1961 Licence quote* as early a* possible to forestall any measures to reduce allocation* he* been an important factor in the recent high rate of overseas buying, »ayv the latest quarterly economic review ot the Bank ot New South Wales. If the additional Imports were passing into stocks, continue* the review, there might be Mttle cause for concern, although it appears probable that import eUiocation* tor the current year were oonssderably more generous than the receipts from exports can support. But the second factor tn the current rate of oversea* spending, the high level of consumer demand within New Zealand, makes it appear very likely that a large proportion of the additional imports are passing rapidly into consumption and that any slackening of the flow later in the year would lead to supply shortages, having serious effects on costs and price* within New Zealand. By the end of March, with the export season well advanced, the declared overseas reserves totalled less than two months' imports at the current rate, and even if payments are curtailed heavily in the latter part of the year, available funds would be insufficient to provide an adequate working balance. Counteracting Measures To meet the situation, the Government has already raised a loan of £2om in London, and if its proposed application for membership of the International Monetary Fund and its associated organisations proceeds. New Zealand’s first action as a member may well be to seek to draw on its borrowing rights from the fund. Such action would provide time for the more fundamental adjustments needed and. with the internal measures already taken, might enable New Zealand to enter 1962 with sufficient basic working balances overseas. Direct action to limit both imports and internal demand has already been taken. The Government has withdrawn the right of holders of R or replacement import licences to automatic additional allocations for the current year when their basic licences have been fully utilised. In requesting the trading banks to take steps to reduce their total advances, the Reserve Bank sought in particular the closest scrutiny of loans to finance imports. In addition, the Government has indicated that import licences issued originally for the calendar year 1961 will now be required to cover overseas purchases of most

commodities for a period of at least 15 months. On th* cid* of consumer demand, apart from the curtailment of trading bank credit, hire purchase restrictions have been reinforced and extended to cover a wide range of goods previously exempted from their operations. Not Sufficient But merely to survive 1961 will not be sufficient, continues th* review. Market prospects for exports next year, while always liable to change radically in response to seasonal and other conditions overseas, appear at this stage no better than present conditions. While th* existing rate of Imports is exceptional, the basic volume of imports required to maintain th* Living standards of growing population is tending to reach a level which current export production at what must now be regarded as normal export prices may not be able to support. If the position is serious now. it may well be far worse in 1962. Further action taken now to limit consumer demand in New Zealand would assist in limiting demand for imports next year. The proposed new Import tariff may assist further although it seems unlikely that it will be possible to rely on these measures alone as a means of reducing imports in the short run. In the longer run, New Zealand, if it is to maintain r growing population at living standards commensurate with those which have been enjoyed in the past, will have to seek methods by which the proportion of national income spent on imports can be directly reduced. They will include the development of local manufacturing industry and also the encouragement of new export industries »uch as those established in the last 20 years based on the pine forest resources of the North Island and the proposed alu minium smelting industry designed to take advantage of the availability of cheap water power for electricity production In the South Island.