“Air Of Unreality" In N.Z. Economic Scene

Press, Volume C, Issue 29625, 22 September 1961, Page 10

“Air Of Unreality" In N.Z. Economic Scene

There was an air of unreality about the Dominion’s economic scene which was reminiscent of the story of “Alice in Wonderland,” said the research director for the New Zealand Bankers’ Association (Mr J. W. Rowe) in Christchurch yesterday. Speaking to members of the Christchurch Junior Chamber, Mr Rowe said four factors made him suggest this.

He said that in spite of a deterioration -in external trading the Dominion continued to borrow heavily and in spite of the failure of import licensing over the years “we still seem to trust this system to see us right.” “In spite of evidence that internal spending is excessive we are not willing to take effective measures to reduce it. And finally, in spite of the fact that we enjoy one of the highest standards of living in the world we continue to expect other nations to make sacrifices for us, rather than for us to make adjustments ourselves,” said Mr Rowe. "The plain truth of the matter,” he said, “is that we are living in a fool’s paradise. The only certain thing of which I am sure is that our population continues to increase.” Any forecasting about the

future was always hazardous, said Mr Rowe, and he thought a safe assumption he could make was that the total foreign exchange earnings available in the years immediately ahead would be about the same as they were at present. The effect of this would be a diminishing supply of imports a head. The big problem would be to reconcile such diminishing supplies with full employment without causing any inflationary explosion, said Mr Rowe. He said from present indications it appeared the Dominion’s economy was stabilising about the same level as last year, although last year total spending was a record. In the current financial year all indications suggested a similar deficit in the balance of payments.

Mr Rowe said he would hazard a guess that total expenditure was running about 8 per cent, in excess of what it should be at present. The only safe way to handle the country’s economy was to impose a fairly severe temporary cut in spending as soon a? possible. It had to be temporary, said Mr Rowe, because the effect it might have on employment was not known. He thought it should also be a reversible process in the

event of unemployment occurring.

The alternative to this was to let import controls go on as at present although this might lead to intense inflationary pressures by next year. Mr Rowe suggested there should be a temporary increase in taxation—although of necessity it should be sales tax. “I do not support higher personal income taxation,” he said. Mr Rowe said he considered the measures taken by the Government in the last six or seven months had been good, some even excellent, but most had been inadequate. Although a strong supporter of many aspects of the Welfare State. Mr Rowe said he thought that if the Social Security system could be trimmed back a little, more to the concept of actual need, then something would have been achieved.