COMMERCIAL Rise In Demand Is Great Challenge

Press, Volume CVIII, Issue 31866, 19 December 1968, Page 22

COMMERCIAL Rise In Demand Is Great Challenge

The potential increase in consumer demand is the greatest challenge to policy-makers over the next few months, the Commercial Bank of Australia believes.

Only part of the present high liquidity in the New Zealand economy needs to be translated into final demand for the increase to be a challenge, the bank says in its latest Economic Review.

Public liquidity in the June quarter of this year increased by more than 6 per cent on the same period last year. It is measured by time and demand deposits with trading and savings banks, stock and station agents, finance companies, and the office money market, plus notes and coin in circulation. “Within the growth of liquidity there has been a comparatively rapid increase in demand deposits as compared to the less liquid time deposits,” the review says. Stimulated It cites a series of events in New Zealand which have stimulated demand. Among these are a relaxation of hire-purchase restrictions and of some investments required to be held in Government securities by in-j surance companies and savings banks; the general wage* order: pension increases: subcontrols.

| The effect was reflected in a large increase in building | permits—S39.6m for Septemi ber. compared to 529.7 m for September, 1967, a rise of more than 4 per cent in retail trading for the September quarter, arid general confidence in importing and the share market. Exports Up Devaluation, and manufacturers’ initiative since, had led to continually improving figures for manufacturing exports, the bank’s review said. These almost doubled this year, rising from 527.9 m for the first eight months of 1967 to 553.4 m for the same period this year, a 47.75 per cent increase. This, together with higher overseas prices and increased sales for meat and wool, a | lower deficit on non-trade transactions, and relatively I stable import payments, had • caused increasingly favourable balances on current account. Repressed “As cannot be over-empha-i sised," the bank says, however. “the crucial feature that has made this possible has been repressed internal demand conditions, particularly during 1967.” sidies to stimulate employment by local bodies: and Government stimulation of the building industry with finance and the removal of

It expects that the prospect of stable wool prices about 30c a lb —“a significant improvement on last year”— will influence general business expectations rather than just farming expenditure. In the light of this increasing confidence and high liquidity, the review concludes, the recent control on trading bank finance will have a limited effect.