POINT OF VIEW U.K. Budget effects may be felt here

Press, Volume CXII, Issue 32873, 23 March 1972, Page 16

POINT OF VIEW U.K. Budget effects may be felt here

(By the commercial editor)

The British Budget, introduced by the Chancellor of the Exchequer (Mr Barber) yesterday, is designed to boost the sluggish British economy through various reflationary measures of which the cut to total taxation of £l2OO million is perhaps the boldest move.

Although this Budget must be regarded as a "European” budget, designed in part to align British fiscal and business practices with continental ones, it is bound to have effects reaching to this comer of the world.

The improvement in the British business climate, which is likely to result, will in time have an impact on the economies of Australia and New Zealand. But th* sharemarkets, particularly in Australia, will undoubtedly be the first to feel the effect of some of Mr Barber's measures.

The programme of voluntary restraints on British investment overseas — imposed by the Labour Government in 1966 — has been abolished, and companies will no longer be required to consult with the Bank of England about the method of financing direct investments in developed sterling area countries.

But of even greater importance to the share market is the abolition of the ceiling on portfolio holdings by British institutions in sterling area countries.

Previously these institutions had been asked not to add to their total holdings in sterling area countries. The direct effect of this on Australian share prices will depend on the extent to which these considerations

had already been discounted, but there is likely to be a surge of interest in Australian shares. At the very least, Australians themselves are likely to anticipate British buying, and the general effect on the market should be bullish.

Any increased British interest in Australian stocks is likely to be concentrated on the leading mining shares and the more solid industrials. It may be expected that

speculative shares will continue to suffer from the crisis of confidence which became evident last year after some of the incidents involving these interests.