The Press TUESDAY, JANUARY 29, 1963. New Zealand’s Economic Needs

Press, Volume CII, Issue 30042, 29 January 1963, Page 12

The Press TUESDAY, JANUARY 29, 1963. New Zealand’s Economic Needs

The third report of the Monetary and Economic Council lays heavy emphasis on the need for New Zealand simultaneously to avoid further inflation and yet to stimulate adequately the

expansion of its economy. Naturally enough, the council's views are coloured by

the approach of a General Election (with the likelihood of economic baits for party - political purposes) and by the European Common Market negotiations. Of the urgency of stimulating faster growth in the New Zealand economy there can be little doubt.

Nevertheless, the council's warning against inflationary risks should be salutary. The council says forthrightly that “the balance “ of payments remains New “Zealand’s key problem", and that “ shortage of over“seas exchange is a key “bottleneck in the process “of developing New Zea-

“ land’s economy ”. After an interesting analysis of the problem of obtaining enough overseas exchange to support a satisfactory rate of domestic growth, the

council suggests an exchange tax designed to encourage greater recourse to domestically - produced

substitutes for imports. Such a tax, the council con-

siders, would not only bear upon the particular form of spending that requires to be restrained, but it would also help to direct industrial expansion into the most appropriate channels. As an alternative to currency devaluation, the council’s proposal merits consideration. Because the

supply of money domestically would not be increased (as it would by devaluation of the New Zealand pound) inflation and consequent pressures on wage rates would be avoided. More-t over, the Government would have a useful tool, in addition to licensing and tariffs, with which to regulate imports and to guide industrial trends within the Dominion. Whether such a tax would accord with New Zealand’s duties under the General Agreement on Tariffs and Trade is not indicated by the Monetary and Economic Council. The public can be grateful for the council’s comparisons of this year with previous election years. Stability, based on judicious restraint of inflationary tendencies, but used as a foundation for healthy economic development, is the aim of policies that the council advocates. “ It “ would seem to be un“wise”, says the council, “to generate a level of “spending and imports in “the coming months which “would necessarily have to “be cut back later. The “ ‘ go-stop-go ’ cycle has “ been damaging to New “ Zealand’s economic growth “in the past, and in our “ view it should be a major “ objective of policy to “avoid it in the future”. Probably even the council realises that unspectacular principles such as those it expounds are unlikely ever to be practised fully by politicians; yet it could scarcely have offered safer advice in the present period of world economic change.