ECONOMIC PLANNING N.Z. Advised To Define Goals More Clearly

Press, Volume CIII, Issue 30602, 19 November 1964, Page 6

ECONOMIC PLANNING N.Z. Advised To Define Goals More Clearly

(New Zealand Press Association)

WELLINGTON, November 18. New Zealand’s performance in the next decade could be improved if greater concern was shown for defining in a more precise manner the goals being sought. This was stated tonight by the Secretary to the Treasury (Mr E. L. Greensmith) in an address on the New Zealand economy—retrospect and prospect —to a meeting of the Wellington branch, Economic Society of Australia and New Zealand

Mr Greensmith said looking back over the last decade or so “we can make the over-all judgment that New Zealand had moderate success in achieving its economic objectives: — “A persistent if unspectacular and somewhat irregular rate of growth. “A little too much inflation. “Continuing balance of payments problems. “Full employment.” Mr Greensmith said in seeking full employment the aim should be to balance jobs with those seeking employment and to attack directly problems such as regional imbalance and shortage of skills.

‘As regards economic growth, while increased investment would help, an immediate contribution could be made by making better use of the existing level of investment.

PRICE STABILITY “The achievement of price stability insofar as it is within our control calls for more attention to avoiding the conditions of excess demand that encourage and facilitate both the cost-push and the demandpull varieties of inflation.” Mr Greensmith said to secure a desirable balance of : payments situation domestic i spending had to be adjusted to accord more closely with the long-run overseas purchasing power of New Zealand’s export industries and more attention ought to be paid to obtaining increased real output from New Zealand’s resources.

Mr Greensmith said although controls would probably still have a place in an economy such as New Zealand’s, their effectiveness had been over-emphasised and it would appear there was considerable scope for gradual liberalisation of the remaining controls, particularly import control. “Specifically there is a need continually to review the degree of protection that is accorded the domestic manufacturer by quantitative control over the volume of competing imports,” he said.

New Zealand’s economic progress could hardly avoid being hindered unless, within the process of industrialisa-

tion that was taking place, special significance was attached to finding the most effective use of the country’s resources and unless systems of tariff protection could be devised which would help bring this about. GENERAL PLANS

“While there is little to be gained by extensive economic planning of the whole economy there would be merit in formulating general plans for leading industrial sectors and for making use throughout the economy of the techniques of the planner, particularly in project evaluation.”

Mr Greensmith said that finally the avoidance of inflation and its damaging effects on all New Zealand’s economic . objectives required greater . willingness to accept variations in tax rates and to accept a wider scope of operation for monetary policy. An economic system’s sole purpose was to serve the community by helping it to realise its aspirations. “Let’s be more clear what these aspirations are, within the limits of practicability, and frame our economic policies accordingly,” Mr Greensmith said. RATE OF GROWTH New Zealand's rate of economic development was relatively low when compared with the rate of progress achieved in some Western European countries and in places like Japan and Mexico, he said. Over the last decade, real output had increased at a rate which on the average had been in excess of the growth of population. The difference between the growth in output and in population had, however, been under 2 per cent a year. “To some extent, this difference reflects some of the poorer nations of the world making special efforts to catch up with us. But to an increasing degree it means that our place in the income-per-head table of the world is moving lower and the margin of advantage which the richer nations have over us is increasing.” It was evident from International comparison that, to

get extra value of output while increasing and extending social amenities, New Zealand would require relatively more capital than was the case in some comparable countries. “The conclusion to be drawn therefore must surely be that, if we want to grow faster in the sense of increasing output per head, we must raise the proportion of our resources devoted to investment," Mr Greensmith said. New Zealand's economic growth could be much faster, with no greater level of savings, and consequently with ;no greater sacrifice, were we to examine in greater detail and depth the actual return !to be obtained from different I projects and were we to ' select those with the highest returns, rejecting those j shown to be incapable of at 1 least matching the average (return from previous invest- ' ment. Mr Greensmith said it was an important question how to avoid periodic bursts of excess activity followed by periods of relative stagnation There was no simple, acceptable answer, but the ingredients of an admissabie solution must include some of the following:— (1) Reduction in fluctuations in farm income and expenditure, often the originating cause of these surges and doldrums. (2) Greater flexibility in the pace at wfliich new Gov- . ernment projects are carried out, the works programme being slowed when resources come under pressure and quickened when slack develops in the economy. (3) An appropriate fiscal policy. (4) Direction of monetary policy to keeping, as far as possible, a steady increase in the country's financial resources, absorbing money where high foreign exchange earnings themselves increase liquidity and providing for increased credit when export prices fall.