Changed attitudes urged

Press, Volume CXII, Issue 32861, 9 March 1972, Page 2

Changed attitudes urged

(N.Z. Press Association) WELLINGTON, March 8. While some of the impetus of the 1969 National Development Conference had been lost over the last 18 months, the longerterm prospects were satisfactory provided changes were made in present policies and attitudes by the Government, employers, unions, farmers and other groups, said the target group’s report.

The most important changes required were in the critical areas of control of inflation, improved industrial relations, improved productivity, an increase in the level of savings and investment, and measures to improve the terms of trade.

Severe inflation of costs and prices threatened the effectiveness of the economy. If it continued at present rates it would prejudice the achievement of social justice, higher living standards and full employment. INVESTMENT HIT "Besides inflicting increasing hardship on those with fixed incomes, rapidly rising costs have seriously undermined export competitiveness and the ability of New Zealand farming and manufacturing industries to plough back profits into investment, and have adversely affected their willingness to borrow,” the report said. Part of the present inflation was generated abroad in rising import prices. The major causes, however, were domestic, initially reflecting excess demand pressures and more recently an unparalleled burst of cost-push inflation. Recently it has become

clear that the traditional weapons—fiscal and monetary policies—used to control inflation were by themselves insufficient. Curtailment of inflation would require not only much improvement in the timing and content of monetary and fiscal policies, but acceptance by all groups of the necessity of a policy of restraint in the rate of price and income increases. The Government had already taken some measures. The report said the targets group did not consider spelling out the details of a specific policy. It believed, however, that any prices and incomes policy which was to have a realistic chance of success should incorporate these considerations:— An acceptable agreement—a social consensus—on the division of national income. Consequently, it would be necessary to extend an income policy to other income groups

as well as to salary and wage earners. If prime stability were to be achieved, the growth of money incomes must be broadly related to productivity growth since aggregate real incomes could grow only with real production plus or minus any gains or losses from changes in New Zealand’s international terms of trade. The administrative arrangements should be realistic, practicable and sufficiently flexible to allow for changes over time in income, price and profit relativities as economic circumstances changed. The policy must take account of the fundamental importance of investment. The public interest in price stability should be a major consideration in price and wage-fixing decisions.