Optimism For New Year

Press, Volume CIV, Issue 30947, 31 December 1965, Page 3

Optimism For New Year

(N.Z. Press Association) WELLINGTON, Dec. 30. Optimism pervades the New Year message of the Prime Minister (Mr Holyoake).

He said everyone should be aware of the nature of New Zealand’s present economic difficulties—but added that it would be a mistake not to recognise the favourable outlook for the future.

“The continued expansion of the economy during 1965 has brought increased prosperity to the people of New Zealand, but has, at the same time, added to inflationary pressures,” he said. “This is not new to New Zealand. We have always been vitally dependent on overseas earnings from agricultural exports to pay for imports of raw materials and capital equipment needed by our rapidly expanding industries. High overseas prices for our agricultural products in recent years have generated an exceptionally high level of internal activity, increasing the general level of spending. Internal Spending “The immediate and longterm outlook for our exports is favourable, but internal spending must not exceed the available resources of goods and services. “The present situation has been difficult to manage. The Government’s policies and administration have been designed to reduce internal expansion without sapping the country’s confidence on the one

hand, and to increase production, particularly export production, on the other.” Mr Holyoake said the Government had deferred less essential work in the economy to reduce expenditure on imports of capital equipment and materials such as steel. To have cut supplies by precipitate action would have caused considerable disruption in industry. Accordingly, the Government had raised loans overseas to cover part of the cost of importing capital equipment. In a young and rapidly expanding economy such as New Zealand, some overseas borrowing was necessary to provide a wider base for the expansion of industry to cater for the rapidly increasing population and labour force. Borrowing Although imports were expected to be much higher in 1965-66 than in the previous year, the Government had not recontrolled those items already freed from import licensing. The drawing of £22 million at a low rate of interest from the International Monetary Fund in November would also help to pay for essential imports until the existing measure to restrain demand became fully effective in reducing internal spending to a proper balance. Mr Holyoake said the measures adopted earlier in the year, and outlined in his review of the economy in December reflected the tasks facing ’the Government and people of New Zealand during 1966. These measures were directed at the gradual restraint in internal demand, without upsetting the economic prosperity and development of the country. These measures were being successful. “It is clear that the economy over-all is tending towards a reduced rate of growth, to quote the recent quarterly predictions of the Institute of Economic Research. We are avoiding the vicious ‘stop-go’ cycles of past years and have applied restraint gradually, but effectively. “The other prong of our attack on the present economic situation—to increase export production—is proving to be equally as successful as our restraint on internal spending. There is evidence that the various agricultural incentives introduced by the Government are now being reflected in increased produc-

tion and a continued high level of investment in farming. More Livestock “Livestock numbers, which are estimated to have increased 3.5 per cent in 1964, are again expected to have risen substantially. The production of wool for the 196566 season is expected to be some 6 per cent higher than the previous season, and butterfat production, after an increase of 5} per cent last season, is again expected, to show a further considerable increase. “A substantial rise is also expected in meat production. This most encouraging expansion of agricultural production is in line with the target figures set at the Agricultural Development Conference in 1964. “It is always difficult to estimate the trend of future overseas prices, but on present indications it would appear that prices for our major exports during the coming year will be approximately the same as those received last year. However, total export receipts are expected to be higher due mainly to increased export production. Manufacturing “An encouraging feature also is the continued growth of exports from the non-agri-cultural sector. For the year ended June, 1965, these amounted to £29.9 million £2.3 million more than for the previous year and a similar increase is indicated for the current year. “Industrial production has also expanded rapidly and it is estimated that in 1963-64 production rose by more than 10 per cent. A similar increase is expected for 1964-65 and again this year. Industries will play an increasingly important role in the diversification of the economy and the production of import replacements. “The Government’s incentives to increase production and exports together with our

present policies of restraint on internal spending prompted the Instiaute of Economic Research to revise its previous somewhat dismal forecast on the balance of payments.”

Mr Holyoake said that although exports to other countries continued to grow, the United Kingdom still remained our major overseas market, particularly for lamb and dairy produce. “Recently, discussions were commenced with the British Government on arrangements to secure continued access on satisfactory terms for these products. These discussions will be continued in the coming months. The Government has every confidence that mutually satisfactory arrangements can be agreed upon. Trade Agreement "A review of the New Zealand economy in 1965 would be incomplete without reference to the free trade area agreement reached with Australia,” said Mr Holyoake. “The agreement which comes into force tomorrow offers New Zealand valuable outlets for an increasing range of industrial and agricultural products.” Mr Holyoake said it was important that everyone should be aware of the nature of New Zealand’s present economic difficulties and so be able to put them in their correct perspective. But it would be a mistake not to recognise the favourable outlook for the future and the many opportunities for the further development and diversification of the economy. “Prospects for agricultural production and for manufacturing industries are good; there is a high rate of investment in our major export industries and tiie level of small savings contiues to rise steadily—all of which is an indication of prosperity and confidence in the future. “On this note, I wish you all a happy and prosperous new year in the belief that it will be just that for the people of New Zealand generally.”