Bank’s Assessment Of N.Z. Economic Problem

Press, Volume CI, Issue 29714, 6 January 1962, Page 16

Bank’s Assessment Of N.Z. Economic Problem

“The problem for New Zealand.” says the Australia and New Zealand Bank in the January " Quarterly Survey,” is how to achieve the desired reduction in expenditure without seriously affecting employment, and without causing undue hardship to any one section of the community. The measures adopted to date wiU be vindicated if the decline in export receipts proves to be temporary.

"Indications are that expenditure on new’ projects is moderating, as the imposition of tighter credit restraints by trading banks takes effect, and future business spending plans are likely to be more restrained. "However, further correction is necessary if domestic expenditure is to be brought into line with the reduced availability of imported goods, and the mildness of the decrease in activity to date indicates that the piecemeal anti-inflationary measures adopted by the Government have not been sufficient to reduce excessive purchasing power in the economy. "Retail trading has fallen

from the peak levels of March but, in spite of definite signs of weakness in certain lines, high turnovers continue. Some reduction in pressure in the labour market, particularly over the last two months, has been evident. “Although the Government is obviously relying on an improvement in export income to restore the external position .export prospects are still not encouraging. Private import payments have slackened slightly since July, and a further decline is expected as import licences are utilised and internal credit restraint becomes effective.

“The well-reasoned and concisely expressed report of the Monetary and Economic Council has accurately diagnosed the economic problems of the nation.” says the bank, which goes on to say: “While mild disagreement might be expressed with some of the specific policies designed to reduce internal spending, and political considerations might inhibit the introduction of others, it appears essential in the present circumstances that additional fiscal measures be undertaken to support monetary restraint. Among the recommendations of the council’s report were proposals to increase taxation or reduce Government expenditure. for higher interest rates and increased loan raisings on the local market, and a reduction in the housing finance provided by the State Advances Corporation.”