Mr Muldoon Wants Steady Economy

Press, Volume CIX, Issue 32120, 16 October 1969, Page 24

Mr Muldoon Wants Steady Economy

(New Zealand Press Association) MASTERTON, October 15. There was no room for further expansion of the internal economy; and, as the labour force was almost fully occupied and there were some serious shortages showing up in key areas, any move for further expansion would cause excessive internal price increases.

This caution was given by the Minister of Finance (Mr Muldoon) today in a speech prepared for delivery to a lunch-time meeting of Masterton businessmen.

He said projections of import payments going forward now to the February, 1970, year, showed payments for private imports as likely to be $792m as against s67Bm for the February, 1969, year.

“This increase of sll4m is not out of line with the increase in export income, but an increase of this magnitude does make it clear that the rate at which the internal economy is now running is quite a high one.” Mr Muldoon said he believed that New Zealand’s

external surplus would run down during the next few months, but that the country would still be in balance by the end of the trading year in June, 1970. Trading bank advances—the last figure he had was for the first week of October, and this was $577m — were somewhat higher than was desirable end still running above the targets. Bank Credit “There is no room for further expansion of bank credit at the present time, and indeed some reason for contraction.” Mr Muldoon said net migration from New Zealand was slowing down rather than stopping, and pressure on the labour market appeared

likely to increase unless the pace of the internal economy eased. “I am still convinced that the flow to Australia will reverse now that the New Zealand economy is running at a more normal pace, but in the meantime some restraint in this country is still needed.” Even Keel The Minister said there was still misunderstanding of the processes that were needed to keep the New Zealand economy on an even keel. “I was asked in the House yesterday by Mr Cracknell, the Social Credit leader, whether the Government intended to take steps to achieve a higher figure of external reserves than the present one, which in fact is quite adequate. “It would be possible to take steps to achieve this—by putting additional taxes on imports, by further restricting bank credit, and by other such means, but the Government has no intention of doing this.” Mr Muldoon said the country must not, however, get into a further boom situation, as this would certainly require corrective measures, and in the meantime consumer prices would shoot upwards.

Now that the supplementary estimates of Government expenditure had been tabled I in Parliament, it would be

seen that there were some additional substantial increases, but that all in all the total for the year was likely to be not far away from the 8 per cent limit referred to recently by the Monetary and Economic Council. Levelled Out Mr Muldoon said that the shortage of skilled tradesmen and the outflow of population had meant that both the demand and the ability to produce houses had levelled out. The Building Advisory Council had asked the Government to set up an inquiry into the housing situation to assess the extent to which these and other ■ factors affected the future outlook. This seemed a reasonable proposal and was being studied by the Government At the same time, Treasury officers were working on a review of finance in the housing and mortgage field generally. Loan Limits “This review is not yet complete but it will cover the field of loan limits and includes the investigation of a scheme for mortgage insurance which would enable higher percentages to be advanced on first mortgage, covered by an insurance against default, and thus obviate the necessity for second mortgages at high interest rates,” Mr Muldoon said. Work on this review was almost complete and it was expected to be before the Government very soon. In the short term there would be good prices for all the meat New Zealand could produce and “reasonably steady prices” for dairy products, although at present these were too low, said Mr Muldoon. Reasonable Price He said there would be some uneasiness at the prospects for wool. “But there is no reason to believe that we cannot sell this year’s clip at a reasonable price plus a proportion of the stockpile at a reasonable price by today’s standards.”

Mr Muldoon said that in the United States the Administration was making strong attempts to squeeze inflation out of the economy. Business activity was levelling out and housing starts were down. Main Sales Traditional American meat —beef—was being priced out of the reach of the average citizen, a point which he had emphasised constantly while in the United States. Mr Muldoon said the decline in housing starts and similar activity could have some effect on the price for New Zealand wool, and for this and other reasons he was not surprised to see some easing in prices at the main sales which started recently.