Balance Deficits Accumulating

Press, Volume CIII, Issue 30602, 19 November 1964, Page 12

Balance Deficits Accumulating

(New Zealand Press Association) WELLINGTON, November 18. New Zealand’s balance of payments deficits showed that as a country the Dominion was not prepared to save sufficiently to meet all its investment needs and was calling on savings in other countries.

This was stated by the Secretary to the Treasury (Mr E. L. Greensmith) tonight.

“The total so called upon in any one year is not in itself alarming, but the grand total is accumulating and beginning to show its cost in the ‘invisible’ payments,” he said. Mr Greensmith said the solution was clear although not easy.

“Balance of payments deficits would disappear but the level of investment could be retained if the level of savings were raised. “There cannot be a foreign exchange surplus to strengthen the overseas exchange reserves unless the country as a whole is prepared to spend less than its income,” he said. Mr Greensmith said another important consideration was that, in the long run, the underlying strength of a country’s balance of payments position would depend on how well it used it resources. He said from a balance of payments view-point it would be unwise to establish a new import-replacement industry that required excessive protection as that would divert resources from more profitable avenues of employment. A continuing current deficit in the balance of payments might be arising largely because of the creation of more money income, more spending power, that we

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could satisfy from output at current international prices. “In other words, there may be tending to develop too great a disparity between the purchasing power of the £N.Z. and the fsterling at the current exchange rate,” he said. Mr Greensmith said the surest way to achieving a better balance of payments situation was by increasing productivity in industry, thus maintaining output while using fewer resources. “The resources so freed could be used for increasing production elsewhere. With some guidance, the market will determine the best use for those resources, either in an export industry, an importreplacement industry or elsewhere,” he said.