N.Z. ECONOMY REVIEWED

Press, Volume CII, Issue 30157, 14 June 1963, Page 14

N.Z. ECONOMY REVIEWED

“Encouraging In Short Tenn“

Although longer-term pros, pects remain, ait best, obscure. the immediate situation of the New Zealand economy is more encouraging than for some time says the Bank of New South Wales in its latest economic "Review ” Stronger export markets., particularly for wool and butter, have lifted export earnings and overseas reserves will show a welcome rise over the trade year ending June, 1963. even though Government borrowing has been on a more modest scale than last year Even supplemented by the I.M.F. drawing potential of £56 million. New Zealand's overseas reserves are still dangerously low for an exporter of primary products and it has been necessary to keep the import licensing target for 1963/64 to last year’s limit of £250 million. The suspension of negotiations for Britain's entry to the E EC and the newly negotiated agreement on butter have removed uncertainty about New Zealand’s access to the British market, but the underlying problem of diversifying exports and developing wider markets still presses urgently. Business activity in New Zealand is satisfactorily buoyant, but not so exuberant as to impose excessive pressures on prices, the labour market, or the flow of imports. Relaxation of some of the remaining restrictions on financial organisations during the last year has given a necessary boost to confidence. but even the appreciable local cash deficit which resulted from the Government's operations in the last fiscal year did not cause any serious distortions. The increased liquidity in the private sector has been reflected in a moderation of pressure on bank advances rather than in rising demand for goods and services. The flow of small savings has also been increased.

The opportunity has been taken to provide the trading banks with a small measure of increased freedom. Since their advances have now been within target levels since July, reserve ratio policy has been administered so as to leave the banks just free of Hie need to borrow from the Reserve Bank.

The administration of selective advance control pol icy has been returned to the trading banks, although the general instructions were not modified. They have also been allowed to undertake special medium-term loans for development of industry and agriculture and for export promotion. Experience will show, says the ‘‘Review.” whether the initial allocation of £4 6 million, equivalent to 1} per cent, of demand deposits, will be adequate for these purposes.