Confidence urged in Australian economy

Press, Volume CXI, Issue 32764, 15 November 1971, Page 18

Confidence urged in Australian economy

(N.Z.P.A.-Reuter—Copyright)

MELBOURNE, November 11

Confidence in the future which was such a prominent feature of Australian business throughout most of the 1960 s seems to have waned, the president of the Institute of Public Affairs (Mr F. E. Lampe) said in a statement released today.

There is little to justify this change in attitudes. The Australian economy remained strong and secure. The balance of payments has never been so favourable. External financial reserves are at their highest point, he said.

“Our exports in 1970-71 reached record levels in spite of the steep slide in wool values. The inflow of capital also surpassed the extraordinary figures of recent years: overseas investors and business interests do not put their money into an economy whose foundations are shaky and whose future is in doubt,” he said. Also, there has been a quite remarkable change in

the prospects of the United States economy and top American economists seem almost unanimous in predicting a jump in gross national product in 1972. This would inevitably have favourable repercussions on the world economic outlook, particularly for Australia and Japan, Mr Lampe said.

But it was true that a number of problems had appeared, the cumulative effect of which aroused disquiet, including the decline in the fortunes of the wool industry, the entry of Britain into the Common Market, the world monetary crises, the state of share markets and the growing aware-

ness of serious environmental and pollution pressures. In the last year or two inflation had accelerated disturbingly and this is by far the most serious problem Australia faces, he said. , There is no doubt that some damage was done to business confidence by the tax increases imposed in the last Federal budget, including the withdrawal of the investment allowance.

The bite of personal income tax at modest income levels is far too severe to leave scope for the incentives and encouragement needed in a vigorous growing economy. The idea that inflation can be braked by tax increases is, the institute believes, now out-dated and a mistaken one in the modern economy.

“In some circles there is an attitude that growth should take precedence over all other economic objectives. But if the present rate of inflation is long continued it will destroy the foundations oh which sound growth can be built,” Mr Lampe said. “Once inflation has been checked Australia need have no doubts about its future. Our future is undoubted and will be a great one,” he concluded.