Economy In Danger, Says Farmers’ Head

Press, Volume CX, Issue 32209, 30 January 1970, Page 1

Economy In Danger, Says Farmers’ Head

(New Zealand Press Association) WELLINGTON, January 29. Inflationary pressures in the economy had reached a dangerous level, the Dominion president of Federated Farmers (Mr P. S. Plummer) said in a statement today.

“Over the last 12 months we have seen the position change from a sound recovery in our balance of payments and our overseas reserves, to a stage where unless this overheating of the economy is checked, and checked quickly, the export industries in all sectors will be drastically affected,” he said. “The inflation we are experiencing is eroding insidiously the constructive efforts that have been made to promote sound economic growth. “The Government did not check these pressures at a stage when more gentle measures would have sufficed. Unless these pressures are dampened prices and wages will increase even more rapidly. “Mr Muldoon on several occasions has spoken against stop/go policies, and has publicly favoured the use of more flexible fiscal measures. But be has let it run on too far.

“There is at present a false confidence buoying up many sectors of the economy, and this needs to be brought back to reality. “The only alternative will be a sudden curbing of drastic proportions when the balance of payments tips against us and our competitiveness in world markets has been lost.

WAGE INCREASES “Over the last year the consumer price index has increased faster than it did in 1968, and this has resulted in a rapid rise in ruling wage rates and awards, and considerable industrial disharmony as workers have turned away from the Industrial Conciliation and Arbitration Act to direct bargaining. “It is a foolish situation, where wages are being pushed up so rapidly, to try to counter the spate of price increases in consumer goods. No-one gains in this. “The excess liquidity in the economy is reflected also in the rapid rise of share market prices, and the flood of capital being subscribed for speculative ventures. “The unsatisfied demand for labour, much of which results from the rapid expansion of protected industries servicing the New Zealand market on a cost-plus basis, is serious.

TRADE PROBLEMS "Against this must be seen the sobering fact that our terms of trade have not improved, and in our main export earning sector there has been a dramatic check in the increase in capital sheep breeding stock. “We cannot expect to see any significant increases in the tonnage of wool, lamb and mutton exported in the next year. Farmers have sold capital stock to maintain their cash position against the rising cost structure. “We cannot afford to let this situation continue and

the. Government must carry the responsibility for allowing this situation to develop. “The urgent need is to restrain these inflationary pressures and hold the economy on a sound basis. Complementary with this is the need to implement rapidly the National Development Conference recommendation to do away with import licensing and widen competition for local industry. In this way there will be a lessening of the competitive bidding for a

limited labour supply and this will hold the cost increases that result in excessive wage demands. “New Zealand must learn to cut its coat according to its cloth. We need to get the heat out of the economy by restraining the rapid rise in Government expenditure on projects that could be phased over a longer period, to make our industries more competitive, and to restore a balance between the supply of, and demand for, labour.”