N.D.C. REPORT Cost spiral seen as worst problem

Press, Volume CXI, Issue 32629, 10 June 1971, Page 2

N.D.C. REPORT Cost spiral seen as worst problem

(New Zealand Press Association)

WELLINGTON, June 9.

Unless the cost-price-wage spiral could be brought under control, the standard of living might suffer, said the annual report of the National Development Council which was tabled in Parliament today.

The report, the first to be presented by the council, which was established after the National Development Conference two years ago, takes the place of the Economic Review as the Government’s pre-Budget document.

“Over the last year, costs, prices and wages have risen much too fast,” the report said.

Unless the rate of increase could be checked, the viability of many industries, particularly fanning and other, export industries, could be undermined. It was too early to evaluate fully the measures the Government had taken. 'The report said that the resolution of the cost-price problem and a number of other critical issues, would determine whether New Zealand achieved the targets set by the conference. These issues included the Common Market, productivity growth, terms of trade, excessive growth in real consumption, and the integration of short-term and longterm policies. The nature of any United Kingdom-E.E.C. agreement on farm products was vital to New Zealand, as the whole target exercise had been based on the assumption that New Zealand’s trade would be maintained if Britain joined the market On support to farmers, the council reaffirmed its confidence in the farming industry and said it believed that long-term policy decisions affecting the agricultural sector should be deferred meantime, and any short-term as-

sistance should be on a selective basis.

The report said that the achievement of the targets required a faster growth of productivity. Higher productivity growth would depend on die attitudes and actions of the whole community. It would also depend on adequate measures being taken in a wide variety of fields. These included: More and better vocational training. Provision of suitable development finance. Settling industrial problems in ways which avoid waste of resources or excessive inflation. The transition from import controls to tariffs as the main form of protection for local industry.

The terms of trade were now significantly lower than projected by the conference for 1972-73, the report said The targets advisory group of the N.D.C. had assumed that the terms of trade would stabilise in the second target period to 1978-79. The Trade Promotional Council was co-ordinating a study of how the terms of trade could be improved, the report said. The chief areas where measures could be taken included changing the composition of exports to products with better market prospects (includ ing additional local processing) and improved marketing of exports. There had been a sharp increase in the growth of real consumption per head of population. This had been claiming resources which would otherwise have been available for investment

The report said the N.D.C. supported the view that the rate of real consumption growth by both the Government and the private sector would have to be restrained if targets for investment and real gross national product growth were to have a reasonable prospect of achievement The possible conflict between short-term and longterm objectives was a problem which all Governments faced. It was most likely to occur

when the desire to stimulate maximum possible increases in output and investment for future growth conflicted with the shorter-term needs to restrain expenditure growth to avoid the difficulties of inflation and in the balance of payments. New. Zealand needed to reduce the growth of private and Government expenditure, and this involved the danger that projects which were important to long-term development would be cut or defer red.

Measures designed to limit consumption often adversely affected investment growth. It was important that the Government avoid this danger in its attempts to limit the rate of growth of its own spending. The N.D.C. recognised that national development was not confined to economic and material betterment, the report said. Long-term planning must always take into account the non-material needs and cultural spheres. Any realistic plan for national development had to take account of a great range of environmental, social and cultural factors, and to shape policies to suit. The report also said that the council had decided to delay the adontion of any new targets until the outcome of the British-E.E.C. discussions was reasonably clear, although preliminary study could start immediately. The N.D.C. had set up a working mechanism for consultative planning, and was now coming to grips with critical noiicv issues. "The resolution of these issues will sometimes require hard policv choices by the council in the first place, then the Government, and ultimately by the community as a whole.

“It is a willingness to face up to these hard policy choices which will determine the extent to which we succeed in achieving our broad national development objectives, including a congenial physical, social and cultural environment,” the report said.

Boy’s progress.— Michael Bevin, aged 9, the boy who spent nearly a week under a floor in the Mangere hospital for intellectually handicapped children, was progressing favourably in Auckland Hospital yesterday. He was slightly dehydrated and un-der-nourished after his ordeal and will stay in Auckland Hospital until he regains his normal health.—(P A)