Institute Predicts Economic Troubles

Press, Volume CIV, Issue 30938, 20 December 1965, Page 9

Institute Predicts Economic Troubles

fNme Irotand Ptcm aeMetatUm;

WELLINGTON, December 19. ne ?l a l ot not to be in the most March. 1967, the New Zealand Institute Economic Research says in its quarterly predictions of nation 1 income and expenditure.

The nstitete’e predietiom a s baaeS ae aa sosumpti a of eentinned anU-inl tiotuuy action by the G ernment, a note to the i epart says. “Cynic might regard this as an h role assumption in view of 1 66 being an election year, wt n Governments are tradition ly reluctant to take unpopul; measures," the note say "If th cynics are right, then Nei Zealand will need a lot of h * not to be in the most eX rente difficulties before the- leriod of our present forecast- is over.” Effmate Chargee Severs previous estimates have beg revised. One is perusal cdzumption, which is

raised from £1,115,000,000 for the year ended March 1966, to £1.190,000,000. Wages and salaries are expected to show a large increase than previously forec^ g r~jH per cent compared with 8 per cent This amendment was made necessary through an unexpectedly fast rate of expansion in the last two quarters. “In spite of these signs of greater expansion, it is now clear that the economy overall is tending toward a reduced rate of growth and some off-setting revisions in other items are required,” the institute says. This increase is put at 7} per cent compared with 5} per cent in the last predletlons because <rf the economy

taaMitaing later than expected. Another revised item is company profits which to now placed at £240,000,000 for the current year compared with tire previous eattmata of £219,000,000. ‘“lnto increase to sdmost enttreiy the result of Signing our figures with the Government Statfstfotan’s, the rate of increase now being 9} per cent compared with the previous estimate of 9 per cent,” the booklet says. Private Capital "Private capital expenditure to now expected to amount to £275,000,000 in the current Merck year compered with the previous estimate of £290,000,000, a percentage Increase of 15 per cent instead of 17 per cent

The biggest offsetting factor, however, to in “investment overseas," which has been revised from minus £28,000,000 to minus £50,000,000 (the minus indicating a capital inflow, not capital outflow as the title suggests).

“With these revisions, we still arrive at a higher gross national product than in our last tesue-£1,800,000,000 compared with £1,845,000,000, but the rate of increase. 7 per cent, remains tire same,” the institute cays.

The institute, in drawing their forecasts until March, 1967, say they are subject to an extremely high margin of error and should be used with the greatest precaution. The institute has based its assumptions on exports on a continuation of the state of affairs for this season except for a lower price for meat. On Government expenditure, the institute has assumed that it will rise at a significantly lees rapid rate to 1966-67 and credit will remain moderately tight It also assumes that slightly more restrictive import controls will be applied. “A much reduced balance of payments deficit Is forecast as a result of reduced rate of expansion and consumption and investment “Since this reduction is assumed to be concentrated upon the import component it is not expected that any significant level of unemployment will result”