The Press TUESDAY, MAY 21, 1974. An early Budget

Press, Volume CXIV, Issue 33539, 21 May 1974, Page 12

The Press TUESDAY, MAY 21, 1974. An early Budget

Mr Rowling’s announcement last week that the Government in 1973-74 collected more money than it was able to spend should not be taken as an indication of tax concessions in the Budget next week. The Minister of Finance ought to be considering ways of dampening consumer spending, rather than ways of promoting it. The Government last year was in the position of many private individuals —it had too much money chasing too few goods and sendees, or inadequate supplies of materials and labour. Further increases in productivity will be difficult to achieve without expensive imports of raw materials and plant; in any case, labour is not available in most areas. And more imports, however desirable, might be prevented by rapid price rises abroad. According to the recent report of the Monetary and Economic Council, New Zealand is likely to show a deficit in its exchange transactions on current account of $4OO million for 1974-75, about half of it caused by the higher price of oil. Measures need to be found to protect both the external and the internal value of the New Zealand dollar. A capital gains tax must be under serious consideration, especially if continuing and necessary restraints on wages and salaries are to be acceptable to the community while the prices for many consumer goods continue to rise under the impact of imported inflation. Some stimulus should be given to savings. The inclination to save is, of course, reduced by inflation, especially saving in ways in which interest rates are controlled. The suggestion from the M.E.C. that inflation-proof bonds be used to reduce speculation in property and protect small savers against the erosion of their funds is worth considering. Without major policy changes Government expenditure is expected to rise about 15 per cent this year. That should be matched easily by the increased tax “ take ” from higher wages, sales taxes and duty; the cost of paying the 9 per cent General Wage Order to al! Government employees, for example, should be easily covered by the return in taxation from higher wages throughout the labour force. In some other areas considerable increases in expenditure might be necessary: some social security benefits ought, perhaps, to be increased more than the 9 per cent promised so far; improvements to internal transport arrangements — especially shipping and railway rolling stock —are matters of urgency; unless the Government has the courage to abandon its freeze on electricity and rail charges substantial subsidies will be required to meet the higher price of oil. Some sectors of the farming industry may need temporary support if they are to survive the combination of higher costs and lower returns from exports. Measures to revive confidence in farming are necessary if the Government is really concerned about the balance of payments a year or two hence.