Inflation Threat “Worst In Decade”

Press, Volume CIII, Issue 30630, 22 December 1964, Page 23

Inflation Threat “Worst In Decade”

“The general wage order was the signal for price increases which now offer the most serious threat of inflation in New Zealand for a decade,” the president of the Bank of New South Wales (Mr J. Cadwallader) told the annual meeting of the bank’s proprietors in Sydney.

“Very satisfactory export ! returns provided solid Support for unusually high business activity in New Zealand during the year,” he said. “Expanding productive capacity emphasised continuous policies of growth. “As the period drew to a close however, it became apparent that measures designed to relieve pressure on consumer supplies were proving inadequate. “Amongst these measures were an intention to maintain firm restraint on trading bank

lending and a request for the newly formed savings banks to defer lending to the private sector until the New Year. “It will be surprising, however, if these measures prove sufficient to counter current cost and price trends in an atmosphere of growing industrial unrest,” Mr Cadwallader | said.

“After a year when the banks have been able to keep pace with the expansion erf the economy, another bout of restrictions would be disappointing, even if lending could be further reduced without causing disruption,” he added.

“It is clear that the banks cannot continue to meet their customers’ essential needs if they are also to bear the main emment’s economic policy.” ernment’s economic policy. Two Developments Mr Cadwallader pointed out that two major legislative developments in New Zealand during the year would have far reaching effects on banking. The first provided for the operation of savings bank subsidiaries of trading banks. Even though highly restrictive conditions had been laid down, the new savings banks had achieved a most satisfactory start, raising deposits of £lom in the first month of op- ■ eration.

“The second was the introduction of a bill which considerably broadened the powers of the Reserve Bank in relation to the trading banks and also gave it power to maintain a watch over the banking activities of other financial institutions. “This extension of powers may provide a broader and more equitable control of economic activity in the private sector,” Mr Cadwallader said, “but New Zealand requires less, rather than more controls if enterprise is to be encouraged to contribute to national development. “The months ahead will not be easy for New Zealand, but if the threat of inflation can be averted external market prospects could help to consolidate the real progress made in recent years,” Mr Cadwallader said.