Bank’s Warning On Overseas Funds

Press, Volume CVI, Issue 31135, 11 August 1966, Page 3

Bank’s Warning On Overseas Funds

(New Zealand Press Association) WELLINGTON, August 10. New Zealand’s external financial position has become “much less comfortable,” because of deterioration in its balance of payments and the difficulty confronting the country as the result of the balance of payments problems in Britain and the United States, according to the Reserve Bank.

The bank’s report, tabled in Parliament today, said: “The deterioration in the balance of payments caused by the rising demand for imports and an increase in payments for invisible items has reduced the official overseas reserves to a point where room to manoeuvre to counteract sudden contingencies has been greatly reduced,”

Commenting on balanee-of-, payments problems faced by Britain and the United States, the bank said: “The measures adopted by these two countries to confine the outward flow of capital funds have created difficulties for lessadvanced countries which rely on external borrowing to finance a large part of their development needs. “New Zealand is not alone in finding official borrowing from overseas sources increasingly difficult to arrange and more expensive to service.” While the sterling and dolI lar currencies remained unIder international pressure, the resultant contraction in New Zealand’s customary sources of external capital posed special problems which would be aggravated in years when existing external loans fell due for repayment, said the bank. From July last year al marked deterioration had occurred in New Zealand’s bal-

ance of payments and at the |end of the last financial year. ! there were no signs of abatement of the pressure. The deficit in New Zealand’s current receipts and payments for the year ended March 31 totalled £58.8 million—but a surplus for the year of £35.2 million on capital account, including receipts of £25.2 million from the International Monetary Fund, reduced the impact of this deficit on the net overseas assets of the banking system. Voluntary Restraints Economic growth had proceeded rapidly last year, and in the closing stages of the

financial year there was little to suggest that more cautious investment attitudes or other voluntary restraints on business activity would significantly reduce the rate of expansion. “Of the factors responsible I for New Zealand’s continuing prosperity, the sustained buoyancy of export earnings I has been of basic importance." said the report. “However, the unusually high rate of economic growth achieved during the last year may be more specifically related to the expansion that has occurred in private, Gov eminent and local authority investment expenditures." Net Government indebtedness to the Reserve Bank increased by £B.l million in the financial year from the previous year’s total of £12.7 million, but the increase arose in March from Reserve Bank purchases of Government securities under special “buyIback” arrangements with offiI cial dealers in the short'term money market.