The Press FRIDAY, JULY 10, 1970. Discipline—Not Devaluation

Press, Issue 32345, 10 July 1970, Page 12

The Press FRIDAY, JULY 10, 1970. Discipline—Not Devaluation

The president of the Canterbury Chamber of Commerce (Mr J. M. Tocker) will not lack supporters for his view that devaluation of New Zealand’s currency may again become necessary, less than three years after the last devaluation of almost 20 per cent. Manufacturers in this country who are also exporters have had the advantage won for them by that devaluation seriously eroded by rising internal costs. On the face of it, further devaluation would seem to restore the advantage in relation to foreign manufacturers which they enjoyed in 1968 and 1969; accompanied by the removal of import controls, it would confer even greater benefits on the more efficient manufacturers. But devaluation, as an economic expedient, is subject to the law of diminishing returns; and it has serious disadvantages which are felt progressively heavily when resorted to more than once. In 1967 devaluation was defensible as a cure for New Zealand’s balance-of-payments deficit, as a means of ensuring full employment, and as an aid to the sale of New Zealand’s primary and secondary products. At present the balance of payments is relatively healthy; primary products, still the bulk of this country’s exports, are finding ready markets; and labour is scarce. The outlook is less promising; but nothing would more certainly reduce international confidence in New Zealand’s economy than a suggestion of readiness to resort to devaluation as an easy way out of economic difficulties that could be overcome by internal economic discipline. In November, 1967, after devaluation, “The “ Press ” noted that the opportunities thus presented would be frittered away if internal costs, apart from those directly attributable to devaluation, were not held in check. They were held for no more than a few months. Now the spiral of wages and prices appears to be accelerating rather than slowing down. What remains of the benefits of devaluation can now be retained only by halting the rise in wages and prices. Voluntary restraint by unions and employers is much to be preferred to an imposed prices and wages policy; but the Government should make it clear that it will not shrink from a duty which may be imposed upon it by the national interest What a Labour Government did in highly industrialised Britain should not be unthinkable in New Zealand.