COMMERCIAL Ab Early Lifting Of Curbs Expected

Press, Volume CVIII, Issue 31657, 18 April 1968, Page 12

COMMERCIAL Ab Early Lifting Of Curbs Expected

It would be unwise to expect any substantial or early relaxation in the restraints imposed on he New Zealand domestic economy, says the Australia and New Zealand Bank, Ltd’s quarterly review.

The unavoidable conclusion is that unless there is a marked improvement in wool prices, the exchange and overseas debt problem will continue to dominate. official thinking, the review says.

This transition to more competitive marketing conditions is likely to accelerate as the Government maintains its policies of restraint and as import licensing disappears. Export Industries The bank concludes that New Zealand cannot afford a continuing decline in the profitability of its major export industries in so far as this has been caused by rising domestic costs. Moreover, the needed switch of resources into new exchange-earning and viable import-replacement industries, made possible, by devaluation, cannot be achieved under conditions of excess demand and easy profits.

Any rapid improvement in export performance after devaluation seems unlikely, and it is evident that the major benefits from this move will not be felt immediately. Some of the effects expected from the 19.45 per cent devaluation in November of last year have been slow to appear. Business Slackness Farm incomes received some immediate benefit from devaluation but, over all, business activity continues to slacken. In fact, marked reduction in spending is apparent in most areas; commercial expectations have been heavily discounted. While overseas payments have declined substantially, meat export receipts have improved and dairy sales have been maintained at high levels, adds the review. Unfortunately, a large part of the benefits from these factors has been offset by the continued weakness of wool prices, which so far have failed to respond to more

favourable world trading conditions. As well, the United States and the United Kingdom have imposed restraints on overseas investment and overseas spending by their nationals which could weaken New Zealand's over-all payments position. The business community is undergoing a rapid transition from the comparatively easy situation engendered by boom conditions and import licensing to a much more competitive and challenging trading environment.