Encouraging Investment

Press, Volume CII, Issue 30129, 13 May 1963, Page 14

Encouraging Investment

It has been estimated that to increase New Zealand's annual net output a head from 3 per cent, to 4 per

cent, a year, extra capital investment of £75 million to £ 100 million is required. The average increase over the last few years has in fact been only -£ 13 million. If there is to be a significant improvement in productivity and New Zealand is to overcome the acute problem of expanding export receipts to finance imports at a level necessary to maintain the living standards of a steadilyincreasing population, increased investment is vital. One way to achieve a significant increase was given by Mr P. N. Holloway in an address to the Institute of Public Administration when he suggested a tax remission of at least the first £lOO of all unearned income to encourage investment. The proposal is one to which the Government might well pay close attention (though it comes, rather surprisingly, from a former Labour Minister of Industries and Commerce); but Mr Holloway ia on sounder ground than many of his former colleagues when he suggests that “it “could well be time to “change direction a little.

“ to encourage more openly “and with real effort those “ people who think a Jittle “of tomorrow, either for “ themselves or for the “ country ”, The Government has already admitted the principle of providing tax remissions to encourage private savings and investment in Government loans; and by extending tax remissions on the lines of Mr Holloway’s proposal, with appropriate safeguards, it would greatly encourage investment from the medium-income group, a relatively untapped source of capital. The Government and the country cannot afford to neglect any means of stimulating savings for investment or ways of encouraging investment; and Mr Holloway’s proposal would do both. It might assist, too, in restraining consumer expenditure, a key to economic stability, and in reducing reliance on overseas investment. As Mr Holloway says, and as the experience of Canada shows, there is a danger in too much of a country’s equity holdings being controlled overseas. Experience has shown that the highest output is achieved by workers with the best equipment and the largest capital investment behind them.