Possible Economic Reforms Discussed

Press, Volume CI, Issue 29909, 24 August 1962, Page 13

Possible Economic Reforms Discussed

Possible reforms in New Zealand’s economy which “suggest the sort of unpleasant medicine the nation will have to take if it is to correct its instability,” were set out in an address last evening to 150 accountants and business executives by Professor A. J. Danks, professor of economics at the University of Canterbury. Professor Danks was giving the opening address in a two-day study course arranged by the adult education department of the university on “Financing New Zealand Business Today.” He suggested that possible reforms would include:— A tighter fiscal policy to increase savings through the Public Accounts.

Credit restriction, and high interest rates.

Thrifty pay-outs under guaranteed and support prices legislation. Restraints on consumption commodity taxes, stricter hire-purchase terms, tighter housing loans, and the like.

Some holding down of cash benefits of the Welfare State type, which probably discouraged savings because of redistributive effects.

Devaluation or a wage freeze, or both.

“I do not propose that all, or any. of the above suggestions are practicable, and any considerable combination of them would powerfully depress the economy,” Professor Danks said.

“We cannot run up overseas deficits for much longer, and we should not be complacent about the prospects of continuing internal inflation.

“Further, irregularities in the supply of imports are not easy to reconcile with steady, full employment. “Clearly, the case for balancing our savings and investments by means other than those charactertistic of the past years, is good,” he said.

"Of course, higher overseas prices would help us. But current expectations in this direction hardly lend themselves to optimism.” Productivity

Discussing productivity in New Zealand, Professor Danks said that population growth had forced heavy capital de-

velopment upon New Zealand in the past and would continue to do so; and small, scattered internal markets, high internal transport costs, and the relative paucity of natural resources, combined to make capital development costly in relation to output. It was not always easy to see where capilal should be applied to New Zealand's economy, because so many prices were “administered,”, so many situations uncompetitive, and so many profits the result of factors other than economic efficiency. New Zealand’s record in applying its resources to capital developments over the last 20 years was by no means bad, in spite of the criticisms he had mentioned already, said Professor Danks. “But caught as we are between growing internal population pressure and rather weak external export markets and prospects, we have no alternative but to increase our efforts to apply investment in the interests of greater national economic efficiency. “How this is to be done is the leading economic problem of the decade; already it is clear that quantitatively the job must grow, and this suggests some abstinences in the present for the sake of future growth,” he said.