'BORROWING TO KEEP SOLVENT’

Press, Volume CVI, Issue 31206, 2 November 1966, Page 1

'BORROWING TO KEEP SOLVENT’

Mr Kirk Sees N.Z. As “A Mendicant State” (New Zealand Press Association) DUNEDIN, November 1. The Leader of the Opposition (Mr Kirk), opening the Labour Party’s election campaign, claimed tonight the Government had scraped the bottom of the financial barrel in a “frantic endeavour to maintain the appearance of national solvency” until after the General Election.

Attacking the Government’s overseas borrowing programme, Mr Kirk said: “We can’t borrow a future. It is incredible that in a year of all-time record export earnings, New Zealand should have recorded a £92.5 million deficit and is being compelled to borrow overseas and pawn its assets to remain solvent.

“We have borrowed to finance consumption. We have borrowed to pay interest. We have borrowed to pay off loans. And, in short, under Nationalist rule, New Zealand has become a mendicant State.”

Mr Kirk said New Zealand had to stand on its own feet to earn its future. “It should become less dependant on the savings of other people and other countries, and more dependant on better management of its own affairs and its own earnings.” No country could be strong —nationally or internationally—unless it was solid, said Mr Kirk. The £92.5 million deficit this year bore irrefutable testimony to the Government’s reckless financial policies and gross financial mismanagement. “For political reasons alone, the Government has tried to play down this deficit—saying it is not important.” Labour’s Loans The Prime Minister (Mr Holyoake), in Christchurch last night, had talked about a Labour Government borrowing £4O million at a time when butter prices had fallen to 206 s a hundredweight and wool had fallen by 25 per cent. “These circumstances had compelled us to borrow £4O million,” said Mr Kirk. "This

is a completely different set of circumstances to the present when New Zealand is enjoying record export earnings—yet has, in the last 12 months, borrowed £55.6 million. “No matter how the Prime Minister tries to dodge the issue, the harsh reality is that during a period of six years of high and record earnings. New Zealand could only remain solvent by borrowing £154 million. ‘Money Not Cheap’ “Not only has the borrowing been massive, but it has been extremely costly,” said Mr Kirk. “Money is not cheap, but we have been paying through the nose.” Mr Kirk’s attack on Government borrowing included break-downs of money borrowed overseas and the overall deficit in the balance of payments. The keynote of Labour’s tax proposals was an incentive for New Zealanders to work and save for their future prosperity. “We propose to give priority to measures that will

encourage production or remove disincentives,” said Mr Kirk. Taxation pnposals aimed at securing the co-operation of the people in reducing the demand for imports formed a major part of Labour’s proposals. Development Bonds The basis of Labour’s plan was to encourage individuals to invest part of their pretaxed income in special accounts for later use in approved capital development. "Our policies are designed to reward those who are prepared to save for the sake of their country,” he said. Labour was confident that increased revenue would come from a growing national income and the introduction of development bonds. If pretaxed money invested in special accounts was not used for capital development, it would earn interest while on deposit—but it would also become taxable. The tax rates would be no higher than would have applied had it been taxed in the years in which it was earned. Individual taxpayers would be encouraged by parallel tax concessions to invest in development bonds which would have a minimum term of five years without interest or 10 years at 3 per cent.

Mr Kirk said the development bonds were designed to encourage savings of from 10s to £1 a week. Farm employees and sharemilkers would be offered a parallel scheme to save money from current income for the ultimate purchase of a farm. “These schemes will be instituted immediately, although the wider aim of over-all taxation policy might take more than three years to attain.” Tax Inquiry Mr Kirk said the measures he had outlined would enable people to build up funds for future development needs and lessen demands on overseas funds. “When, as a result of these measures, productivity rises and real income grows, Labour will adjust the present personal tax exemptions and modify the graduated steps by which income tax rates now increase. “Our proposals are indicative of the forward-thinking that is behind the entire Labour Party policy. They will help New Zealand overcome its present chronic economic state and give people an incentive to save and invest for future development.”

Labour would also widen the scope of the inquiry igtp the taxation structure to embrace the incidence of localbody rating and amend certain estate-duty provisions to remove the effect that the duties had on producers—and consequently on production. Mr Kirk said Labour’s finance and tax proposals would go a long way towards rectifying the economic ills which beset New Zealand at present. “The policy pays special attention to people in receipt of superannuation and others on fixed incomes, and it recognises the need for planned industrial development and decentralisation of industry.”