Wage-price rise action promised

Press, Volume CXI, Issue 32803, 31 December 1971, Page 2

Wage-price rise action promised

(New Zealand Press Association)

WELLINGTON, December 30.

The Government was determined that New Zealand would break out of the futile cycle of wage and price rises, and it would take whatever action it deemed necessary to do this, said the Prime Minister (Sir Keith Holyoake) in his New Year’s message.

“But the Government action alone is not sufficient to reach this national goal the co-operation of all sections of the community is vital,” Sir Keith Holyoake said.

Continuing price and wage increases at far too high a rate had been the country’s major economic problem in 1971.

“Many other countries are finding that this cost-push inflation can be cured neither quickly nor painlessly. Their experience in no way lessens the urgency and imnorta of New Zealand sharply reducing its rate of inflation. "New Zealanders hardly need reminding of our dependence on exports, but it must be brought home that rising internal costs can destroy our competitive position in world markets and threaten the attainment of the people’s economic and social aspirations,” said the Prime Minister.

Government steps early in the year had helped to moderate the rate of inflation, but the delayed effects of the unprecedented wage and price escalation of the latter part of 1970 continued well into 1971. Because of the Stabilisa-

tion ot Remuneration Act there should now be a significant pause in wage negotiations after the settlement in recent months of most major awards. “However, as the average level of settlement has exceeded the growth rate in productivity, more price rises can, regrettably, be expected in the early months of 1972. The Government is most concerned about the effect of spiralling costs on groups whose incomes do not rise commensurately. These include those on fixed incomes and most exporters, but particularly sheepfarmers.” The June, 1971, Budget included measures to improve and increase the flow of finance to farming and to raise subsidies on some important items of farm expenditure. Since then the Government had introduced

la supplementary finance scheme and a stock retention incentive scheme designed to strengthen sheepfarming. The Agricultural Production Council would soon examine the longer-term prospects of sheepfarming and make recommendations.

Social security ' benefits (other than the family benefit) and of all means-test war pensions had been increased and the Government would look further at all aspects of social security when it received the report of the Royal Commission, expected in March, said Sir Keith Holyoake. “Government steps to keep the economy moving on an expansionary path, consistent with the overriding objective of curbing inflation, have included removing the 10 per cent individual income tax surcharge from August 1, 1971; reducing the ratio of deposits trustee savings banks must invest in Government securities; easing the guideline requirement for trading banks* lending; and introducing the two schemes of assistance to sheepfarmers.

“Further, with the specific aim of stimulating investment some taxation relief will be given companies this year, reducing the maximum tax rate to 45 per cent.” Overseas reserves The recent general realignment of exchange rates had provided a welcome end to the period of international monetary uncertainty after President Nixon’s decision in August to suspend convertibility between the United States dollar and gold. New Zealand’s official

overseas reserves were at an exceptionally high level, and forecasts of current account transactions were encouraging, said the Prime Minister. The conclusion of Britain’s negotiations with the European Economic Community was the most important international economic event for New Zealand in 1971. “I am satisfied that the special arrangement*, negotiated for New Zealand were the best the British could, in the circumstances, get for

us. There is a great deal of work ahead in 1972, to complete details of the special arrangements on butter and cheese.

“Until this has been done, it will be difficult to judge the exact impact on New Zealand’s economy. But I am confident we can safeguard New Zealand’s interests within the framework of the broad agreement reached between Britain and the Six.” Living standards in 1971, measured by real consumption per head, rose above the average target level adopted by the National Development Conference in March. 1969, said Sir Keith Holyoake.

“This is just one aspect of the quality of life we enjoy in New Zealand and if we want to enjoy even higher living standards and more leisure, and devote more resources to education, social and health services, and the preservation of our environment, we must raise our productivity. This is an inescapable fact.

"Greater productivity demands a positive attitude to change in the use of the nation’s resources. Above all, a prerequisite for success is to prevent a repetition of the internal cost increases which so adversely affected 1971,” the Prime Minister said.