Aim To Stabilise Home Economy, Boost Exports

Press, Volume CIII, Issue 30471, 19 June 1964, Page 7

Aim To Stabilise Home Economy, Boost Exports

(From Our Parliamentary Reporter) WELLINGTON, June 18. More stable domestic conditions and an expansion of exports were the basic elements of a policy designed to achieve a faster rate of economic growth, said the Minister of Finance (Mr Lake) today in the economic review presented to the House of Representatives.

Reports of the Monetary and Economic Council had to some extent fulfilled the need met in the past by the economic surveys, Mr Lake said. It was still desirable in the interests of public discussion and. understanding of economic issues that the Government should review its economic decisions, outline the reasons that prompted them, and set them, in the perspective of the Government’s longerterm policies and objectives. “The economic situation last year was characterised by a substantial increase in real output, but also, unfortunately, by an even higher rate of increase in national expenditure,” the Minister said. “Basic to both was the high wool price and the generally favourable prices for other exports.” Future Output The year had not been a boom one in the pattern of 1957-58 and 1960-61. A more significant proportion of the rise in spending was on investment, and the gap between the growth in expenditure and output was not so large. Much of the increased prosperity had been used to build up the productive capacity of the economy, laying the foundation for increased output, in the future. “Nevertheless, continued spending in excess of current resources would result in a drop in our overseas reserves and force up costs and prices, thus undermining the very real gains that have been achieved,” Mr Lake continued.

■ “A further rise in export prices of the order expeii- ; enced in 1963-64 is unlikely, i Consequently the amount of. i additional resources availl able in the coming year may • well be significantly less than ’ last year. 1 "Spending will have to be adjusted accordingly.” Export Prices Experience last year emphasised that the problem of ’ regulating the economy In the face of variations in exj port prices had not been 1 solved completely. If the ' Government endeavoured tb ; use monetary and fiscal policy ’to offset fully short- ; term increases of expenditure engendered by rising farm ! incomes this could unduly ■ inhibit the growth of other ' sectors. The problem must be approached at an earlier stage in the process by making farm spending less suscept- . ible to variations in export f prices.

The existing farm income ■ stabilisation and floor price . arrangements provided rea- '■ sonably effective protection • against the disturbing effect ■ of low export prices, but with i the exception of the dairy products scheme they did , not act as regulating mechanisms when' export prices were high, the Minister continued. To help to overcome this, 1 the Government had introduced the voluntary wool ’ proceeds retention scheme L with the object of encourag- . ing woolgrowers to ; spread i the higher incomes over a [ period of years. If farm in- . comes could be partly' stabil- , ised by this or other means, i then the wide cyclical fluctuations the economy expert- . enced would be reduced. More stable domestic conditions were not just an end . in themselves. They were i sought because they created : an economic climate more ■ conducive to a faster, balanced, and more sustainable . rate of economic growth. “This objective also requires expanded export production supported by action to retain and develop remunerative international markets for our exports,” Mr Lake said. , . “It will take time to increase our capacity to ex- ’ port, while the task of preserving and developing our i markets is a continuing one. l A comprehensive programme to ensure adequate expansion ' of all export and potential • export industries is already . in train.”