FORECAST ON TAX CHANGES

Press, Volume CVII, Issue 31449, 16 August 1967, Page 1

FORECAST ON TAX CHANGES

Controversial, Says

Mr Muldoon

(New Zealand Press Association)

WELLINGTON, August 15.

The Government’s reviews of taxation and monetary policy would be highly controversial, the Minister of Finance (Mr Muldoon) said today. Addressing an Auckland Chamber of Commerce luncheon, Mr Muldoon said he was now engaged on the taxation study and later proposed to undertake a study of monetary policy.

“I have no doubt that the reviews of taxation and monetary policy will be highly controversial,” said Mr Muldoon. “In the taxation field it will clearly involve tightening in certain areas as well as relaxation, and revenue concessions must to some extent be compensated by revenue increases.”

The economic situation was still fluid and demanded flexible policies, Mr Muldoon said.

If the current rate of private imports continued and was accompanied by reasonable export prices, it could result in a satisfactory reduction in New Zealand’s external current deficit for the year ending June, 1968,

and a return to an approximate balance a year later. There were still some clouds on the horizon, Mr Muldoon said. These included some signs of dairy product surpluses and lower prices for lamb and by-products. The present internal loan was meeting a good response and small savings were increasing remarkably well.

“While I anticipate that this period of consolidation will continue for at least two years, I do not propose to ignore the need for further developments in economic policy,” said Mr Muldoon. “In October I expect to receive the Ross Committee report which is reviewing our taxation system. I know that this will be a most valuable document.” Reply To Banks Referring to statements by the trading banks, Mr Muldoon said the Government “is not likely to be coerced by suggestions that bankers are fed up with developments of monetary policy.” “You will be aware of the campaign which has been mounted in recent months by the trading banks in an endeavour to have monetary policy altered in their favour,” said Mr Muldoon. “The banks have, in general, co-operated with the Government in the implementation of policy, but I remind you that they are not the only institutions affected by monetary policy." He said insurance companies, building societies, stock and station agents, finance houses, short - term money market operators, and most importantly, the business and commercial community and public were all affected by monetary policy, and their views and interests must be considered.

Change “Inevitable”

Mr Muldoon also said that the growth in non-banking institutions and trade credit was inevitable as the economic and the financial system became more sophisticated. Lenders required different types of financial assets as they became more conscious of the income-earning capacity of liquid funds. In addition, various types of credit were required—advances for the seasonal needs of industry and commerce, seasonal and long-term finance for primary industry, hire purchase, trade credit, and mortgages. Government measures of monetary restraint had been widely spread, covering savings banks, insurance companies, finance companies, hire-purchase organisations, and trading companies as well as trading banks. "This will be continuing policy,” Mr Muldoon said. “The banks, in general, realise that their main objective is service to the community, but some recent statements have held more than a suggestion of the reverse,” Mr Muldoon said. The Minister said he had recently seen the proposed scheme for a two-tier overdraft charge and had returned it to the banks with certain suggestions. “Specifically, I do not think this charge should be used to increase the banks’ income,” he said.