Overseas Borrowing By Govt. Again This Year

Press, Volume CI, Issue 29766, 8 March 1962, Page 11

Overseas Borrowing By Govt. Again This Year

With an expected deficit on overseas exchange transactions this year, the Government again proposed to borrow money in London, and possibly from the International Monetary Fund and the World Bank, and also from Switzerland and the Netherlands, said the Minister of Finance (Mr Lake) when he addressed the annual meeting of the Canterbury branch of the New Zealand Society of Accountants yesterday.

“I cannot tell you how much we will borrow this year.” said Mr Lake. ‘‘lt <’3pends on the amount available.”

Mr Lake did, however, mention an amount of £ 11.4 m from the International Monetary Fund, which was “available for the asking.” "Tie World Bank also regarded New Zealand as a credit-worthy country, he said.

New Zealand's export reserves stood at £s4m at February 28 this year, Mr Lake said. He hoped reserves would continue to rise until June, when they would go down. “We will have to cut our import cloth accordingly,” Mr Lake said. “Many imports will be for capital purposes, and overseas borrowing is justified to obtain a certain amount of capital goods.” Mr Lake said. “A country like New Zealand must have capital equipment.”

Maintaining Confidence Summarising the economic situation in December, 1960, when the Government took office, Mr Lake said that internal inflation had looked like getting out of hand, and the overseas balance-of-pay-ments situation had been deteriorating to a marked extent The country had been grosperous on the surface, ut living beyond its export earnings. Internal demand had been out-running overseas earnings. and the prospects for 1961 had been “not good.” The Government had been faced with two alternatives —either introducing substantial and punishing increases in taxation and recalling a substantial amount of import licences, or introducing milder and longer-term measures to avoid disrupting commerce. It had taken the second alternative, for which it had been criticised by some “armchair economists." “If we had taken harsh measures, we would have caused unemployment, and retarded the progress of our country,” said Mr Lake. “The Government took the view

that it was essential to maintain business confidence both in New Zealand and overseas.”

The Australian Government, in November, 1960, had taken measures which had created unemployment, and had been trying to overcome their effect ever since. “We do not want to see unemployment—or any substantial unemployment in this country,” Mr Lake said. In 1961, the external trading result had been “very adverse,” with an adverse balance of £s2jm for the year ending December, 1961, Mr Lake said. That had had to be financed by borrowing £27m in New York, by the sale of some investments in London, and by the running down of the exchange reserves by £l7m.

“That exercise cannot be repeated,” said Mr Lake. “We cannot this year run down our reserves by £l7m." Reduction of Imports Of the current economic situation, Mr Lake said that there was a “very gratifying" reduction of imports. For the six months ended January this year, private import payments amounted to £l2om, compared with £ 148 m for the previous six-monthly period an improvement of £2Bm. “The decision of the Government to extend the 1961 import licensing period for six months was a wise decision,” Mr Lake said. “But I would sound a note of warning about over-buying in the first six months of the next licensing period, which is from July 1 to June 30, 1963. I hope that businesses will spread their importing orders over the whole of the period.” It was still necessary to hold restraints on internal demand, and there was some evidence of a decline in demand, which was what the Government was aiming for, Mr Lake said. Bank advances had fallen by £l9m, compared with a rise during 1961, and the figures for February indicate a continuation of the downward trend. As to hire purchase, the Government was looking to see if some relaxation could be made in hire-purchase terms. The value of building permits issued was a pointer to the national economy, Mr Lake said. The figure of £ 43.8 m for the last six months of 1961 was a decrease of £6.Bm on the previous figure, and £B.2m below the high level of the second half of 1960. In some areas of New Zealand, there was still a considerable backlog of building work, Mr Lake said. The Government was in a position to stimulate the building industry in any area where it needed stimulation, he said. The Government was watching closely the effect of seasonal work on the employment situation, said Mr Lake. There might be some problem with some unskilled freezing workers not being able to find the off-season casual work that they had in the past. Farming incomes this year would be “not so bad,” Mr Lake predicted. “I don’t say that they will be up on last year, but wool is good, and mixed farming satisfactory,” he said.

Of the current economic situation, Mr Lake said that there was a “very gratifying" reduction of imports. For the six months ended January this year, private import payments amounted to £l2om, compared with £ 148 m for the previous six-monthly period an improvement of £2Bm. “The decision of the Government to extend the 1961 import licensing period for six months was a wise decision,” Mr Lake said. “But I would sound a note of warning about over-buying in the first six months of the next licensing period, which is from July 1 to June 30, 1963. I hope that businesses will spread their importing orders over the whole of the period.” It was still necessary to hold restraints on internal demand, and there was some evidence of a decline in demand, which was what the Government was aiming for, Mr Lake said. Bank advances had fallen by £l9m, compared with a rise during 1961, and the figures for February indicate a continuation of the downward trend. As to hire purchase, the Government was looking to see if some relaxation could be made in hire-purchase terms. The value of building permits issued was a pointer to the national economy, Mr Lake said. The figure of £ 43.8 m for the last six months of 1961 was a decrease of £6.Bm on the previous figure, and £B.2m below the high level of the second half of 1960. In some areas of New Zealand, there was still a considerable backlog of building work, Mr Lake said. The Government was in a position to stimulate the building industry in any area where it needed stimulation, he said. The Government was watching closely the effect of seasonal work on the employment situation, said Mr Lake. There might be some problem with some unskilled freezing workers not being able to find the off-season casual work that they had in the past. Farming incomes this year would be “not so bad,” Mr Lake predicted. “I don’t say that they will be up on last year, but wool is good, and mixed farming satisfactory,” he said. “In Cabinet each week, ve have a discussion on tb» economic situation, and we have a pretty good idea how things are going.” Mr Lake said. “I can assure you that the matter is being watched almost from day to day.” Britain and EJK.C. Of the terms of Britain’s possible entry into the European Economic Community, Mr Lake said: “We are constantly in touch —ad nauseum —with the High Commissioner in London about Britain’s entry. The Government is relying on the British Government’s assurances to us, and the negotiations show that the British Government is aware of its responsibilities to New Zealand. “I am satisfied that the time has now come when the United Kingdom is unable to absorb our expanding production, and that is why a lot of attention is being paid by the Government to

“I am satisfied that the time has now come when the United Kingdom is unable to absorb our expanding production, and that is why a lot of attention is being paid by the Government to the search for new markets," said Mr Lake. “Some success is being achieved.” Every country had now become “export conscious.” said Mr Lake* and in this vital period for New Zealand,

“In Cabinet each week, we have a discussion on tb» economic situation, and we have a pretty good idea how things are going.” Mr Lake said. “I can assure you that the matter is being watched almost from day to day.” Britain and E.E.C.

Of the terms of Britain’s possible entry into the European Economic Community. Mr Lake said: “We are constantly in touch—ad nauseum —with the High Commissioner in London about Britain’s entry. Hie Government is relying on the British Government’s assurances to us, and the negotiations show that the British Government is aware of its responsibilities to New Zealand.

she had to hold her export costs to compete with those other countries.

“The economic situation will require a continuation of restraint on spending for some time yet,” Mr Lake said. “The Government will strive to provide a stable economy. It will continue to raise loans overseas, whenever practicable and desirable, for capital development.” Less than 2 per cent, of New Zealand’s export earnings went in debt services, said Mr Lake. In 1921, 15.9 per cent, of overseas earnings went on debt charges. In 1939, the figure was 12 per cent., but last year it was only 1.8 per cent. “We think that with a country dependent on overseas trade, and rapidly growing in population, the policies implemented by the Government will result in a higher standard of living,” Mr Lake said. “Our economy is basically sound, and has great potentiality. We must bear with temporary restraints and savings so that a sound basis can be laid for the future.” (Applause).