The Press FRIDAY, JUNE 15, 1973. Expansion—and inflation?

Press, Volume CXIII, Issue 33252, 15 June 1973, Page 8

The Press FRIDAY, JUNE 15, 1973. Expansion—and inflation?

The first Budget presented by a Labour Minister of , Finance in New Zealand for 13 years should bring as much disappointment to the party faithful as relief j to those sections of the community expecting to be j hurt bv the Budget. Anyone expecting the new ; Government to take the first opportunity to provide gi-andly for social reform, for improvement of the environment, or for redistribution of income from the wealthy to the poor, will have been disappointed. The activities of money-lenders, landlords, property speculators, and shareholders have been frowned on , by Mr Rowling, but curtailed in only minor respects. , Even the provision for doubling the expenditure j on external aid may be taken with a grain of salt, ■ it is doubtful whether an increase of this order can | actually be spent in the present year. Surprisingly, j even if all the money voted in this Budget were spent this year, total Government expenditure would rise less this year than last. The increase last year I was 19 ner cent, compared with a budgeted 171 per cent this year. The expected deficit before borrowing this year is $232 million, compared with an actual deficit before borrowing last year of $213 million. Until the outcome of this year’s borrowing is known, the net contribution of the Government’s activities towards monetary stability or inflation cannot be assessed: last year’s borrowing exceeded the budgeted deficit by $l3 million, so that the net effect of the Government’s operations was disinflationary. The outcome of this year’s operations will, to a large extent, depend on the behaviour of the country’s small savers: if they draw on their Post Office savings accounts, or save less than they did last year, the enforced savings of the large financial institutions can scarcely make up the difference. Mr Rowling has redeemed some of his party’s pledges by promising to repay rather than renew overseas loans, by providing for tax concessions for overtime and shift work (but not for the selfemployed or salaried taxpayer), by offering minor incentives for regional development, by establishing a rural banking and finance corporation (removing this function from the State Advances Corporation), by providing for the building of more State houses, by increasing social security benefits, and by reducing personal income tax for those at the bottom of the scale. Most of these provisions will cost little if anything this financial year. Few farmers will be surprised by the reduction in subsidies in the Budget: most should be relieved that so many subsidies and tax concessions have been retained. The 5 per cent “ guideline ” for wage increases, implicit in the new conditions for approving price increases, is highly discriminatory — mainly against employers in the private sector, striving to hold labour in competition with the State, which is already paying wages substantially higher than those provided under awards negotiated by trade unions. Mr Rowling gives no undertaking to hold wage increases in the State sector to 5 per cent; in fact he is budgeting for an average increase of about 8 per cent in Public Service rates of pay. The main criticism of the Budget must be levelled at the inflationary expectations it engenders, rather than at its provisions for increased Government spending. Professions of concern about increased costs of housing and foodstuffs, of determination to end property speculation, of disdain for the previous Government’s “ stop-go policies ” are no substitute for action to halt inflation. If householders decide —as well they might — that spending, not saving, Is the only rational behaviour in a situation of evermounting prices, the Government may soon regret its failure to introduce a Budget containing imaginative incentives for increased saving.