‘Challenge’ to economy

Press, Volume CXI, Issue 32659, 15 July 1971, Page 3

‘Challenge’ to economy

6V.Z. Press Assoctolioni WELLINGTON, July 14. The major challenges to New Zealand’s sensible economic management rested in the system of industrial relations and in the methods of determining wages and prices, the chairman of the Monetary and Economic Council (Professor F. W. Holmes) said today. “If persuasion continues to fail to bring more order into price and wage fixing, then more severe direct control by the Government in the public interest will almost certainly become inescapable,” Profes-

sor Holmes told the Wellington branch of the Society of :• Accountants. ‘Jit is clear that the present 5 system of direct control over - remuneration and prices will . not, of itself, prevent a fur- _ ther sizeable increase in pay " and living costs. • “It is an unfortunate fact 3 that most unions and em--3 ployers seem to be regarding the 7 per cent increase enun- } ciated in the Stabilisation of 1 Remuneration Act not as a . maximum but as a minimum.” ) Professor Holmes said that if all incomes went up by 7 per cent and productivity rose by only 2 per cent then, unless the balance of payments was allowed to detern iorate further, the country y was effectively planning for c a farther rise in prices of y about 5 per cent, in addition i- to what was in the pipeline

already as a result of past cost increases. Another factor bearing on the appropriateness of the Government’s tax and expenditure policies was the Government’s ability to borrow from the public. Professor Holmes said. He expressed reservations about the Government’s present borrowing policies and attitude towards the structure of interest rates. “Rates of interest on Government securities have become relatively less attractive, while the small savings institutions and the official money market, which have in the past provided a significant proportion of the “captive” funds invested in Government securities, have been at an increasing disadvantage in attracting and retaining : funds."