The Press TUESDAY, JUNE 11, 1963. The Three-Year Itch

Press, Volume CII, Issue 30154, 11 June 1963, Page 12

The Press TUESDAY, JUNE 11, 1963. The Three-Year Itch

The Monetary and Economic Council’s warning to the Government to prevent election-year inflation of the kind experienced in 1957

and 1960 is a study in moderation; but it is not the less forceful for that. Briefly, the report shows that the Government cannot afford (in its own interest as well as in the interest of the nation) to permit over-importing, to allow credit to become too easy, or to contribute in the Budget to the expansionary mood of the public. The last warning is the most important of the three. The Government has said often enough that private imports are to be kept to £250 million this year; and, in spite of the rumours of special car imports, its intention to keep its undertaking must be accepted. The Reserve Bank seems firmly in control of credit. But all the signs suggest that the Government proposes to reduce taxation. The Monetary and Economic Commission does not say taxation should not be reduced in any way. It

is, indeeck in favour of reductions that would encourage productivity. What it does say is that 'any reductions should be part of a Budget that is balanced.

The modest recommendations of the commission on this occasion may be compared with the sterner prescription of its first report to the Government in October, 1961. It then recommended new taxes, a lower

butterfat price, less money for housing, and a tighter credit squeeze. The Government. taking into account factors that are not the concern of economists, decided that economic adjustment shotrld be made much more gradually. It is fair to say that results justified* that decision. Having once successfully disregarded some of the advice it was given, the Government may be tempted to rely on its own judgment again. Before doing so, it must ask how much of its success was due to foresight, and how much to luck. In the circumstances it is satisfactory to have the assurance of the Prime Minister that the commission's views will be heeded. The course the Government will follow this year does not, of course, depend only on its good judgment. More important, perhaps, is its firmness of purpose. The Monetary and Economic Commission has noted signs of the threeyear itch that infects business with over-confidence. This expansive mood is already putting pressure on the Government, and the pressure will grow. It must be resisted. The Government will find it easier to stand firm if public opinion is informed of the benefits of long-term goals and the reasons for short-term restraints The commission has repeatedly urged the Government to enlist this public support; and none of its advice is sounder.