WAGE ORDER HEARING TO RESUME ON MAY 8

Press, Volume CVIII, Issue 31661, 23 April 1968, Page 30

WAGE ORDER HEARING TO RESUME ON MAY 8

(New Zealand Press Association)

WELLINGTON, April 22. New Zealand should continue its period of consolidation for a while yet, the Governor of the Reserve Bank (Mr A. R. Low) told the Arbitration Court today.

He said any easing on expenditure would lengthen the country’s period of recuperation.

Mr Low was being examined by Judge A. P. Blair during the resumed hearing for a 7.6 per cent general wage increase. Judge Blair asked Mr Low whether the court should try to fix its own priorities when considering the evidence that had been placed before it during the hearing. Mr Low said the period of consolidation should continue. This would give New Zealand a chance to continue improving its balance-of-payments situation and the economy in general. Earlier in the day Mr Low

had said that New Zealand's economy was on the upturn. He said the country’s overseas assets stood at s2o6m on April 10. Mr Low said if the controls on consumer demand continued for a while New Zealand would soon be able to move its current account payments into balance. “If we can stick it out—and I don’t think it will be for long—we will be able to get rid of the short-term debts due in the next few months,” he said. “We will be able to remove more exchange and import controls also.

“The country will be put in a stronger position and will then be able to get spending increasing again.” Mr Low said the issue was a matter of timing, judgment and priorities. Judge Blair asked Mr Low if he disagreed with the Government Statistician (Mr J. V. T. Baker), who in earlier evidence said that consumer demand had already been pushed too low and there was room for some alleviation. Some Too Low "The Government acknowledges that some elements of consumer demand have fallen too low,” said Mr Low. "These included local authority spending and house building, and furniture industries.” The Government had taken measures to improve this situation, he said. “I agree that adjustments should be made at particular points in the economy but on total I don't think the economy is too depressed,” he said. “The measures that were taken had to be taken to strengthen the economy. “I don’t want to see demand depressed as it is now in the long-term, though.” Mr Low also told the court today that New Zealand had been “living beyond its income” for most of the period since World War 11. Bank Advised He said the Reserve Bank had advised successive Governments of this position. Credit restraint policies and varying economic measures applied over the period had not been sufficient to improve the position. Mr Low said the bank also did not support a policy of borrowing when export receipts had been high. Such policies had been carried out during the post-war period. If higher reserves had been built up the situation which developed from the fall in wool prices would not have been so acute. Mr Low said good results

were coming from the improvement in the balance-of-payments situation. Small Upturn He said the drop in imports had been partly, but not wholly, responsible for the improvement Invisibles had ceased increasing as a deficit. He expected a small upturn in the volume of imports in the next few months. Mr Low also said New Zealand had had mild inflation in the last six years. This Resulted from excess in demand and over-full employment. When there was an excess demand there was a tendency for prices and other related factors to rise.

Replying to a question from the president of the Federation of Labour (Mr T. E. Skinner), Mr Low said an increase in annual wage bills by sl7om would not increase money in circulation by that amount. Wage Bill Employers earlier submitted that if the application was granted in full and applied the same way as past general orders, it would increase the country’s wage and salary bill by more than sl7om. They said it would put that amount of extra purchasing power into the hands of the wage and salary earners who received the general wage order. The increased income would then be available for spending. Some of the additional wages would undoubtedly be paid out of bank credit (employers’ overdrafts), said Mr Low. Mr Low was asked to explain what he meant by saying earlier in the hearing that unemployment of about 0.5 per cent was not the disaster that many people feared. Some Hardship Mr Low said that before the beginning of last year and before unemployment began to rise above 400 to 500, the general opinion then was that unemployment of as much as 0.5 per cent would be disastrous. What had happened was some hardship for some persons, but the larger number of unemployed had not proved disastrous for the economy. Mr Low said he was not recommending unemployment. Policies necessary for maximum internal growth and healthy external balance might result in some unemployment, but it would be for the over-all benefit of everybody in New Zealand, including the workers, he said. Evidence presented by Mr Baker today said the grant-

ing of a 7.6 per cent increase in wages would result in a 2.6 per cent increase in the consumers’ price index.

If the application was granted in full and applied to all wage and salary earners wage costs would increase by the same amount.

As these costs made up 34 per cent of the expenditure covered by the index the application would lead to the 2.6 per cent rise. The hearing will resume on May 8.