The Press THURSDAY, JULY 11, 1974. Profit control to curb prices

Press, Volume CXIV, Issue 33583, 11 July 1974, Page 12

The Press THURSDAY, JULY 11, 1974. Profit control to curb prices

The Minister of Trade and Industry and the secretary of his department are given what may turn out to be excessive powers to regulate commerce in New Zealand under the new Price Stabilisation Regulations. Although the Government gave some notice of its intentions, copies of the regulations have been slow to reach Christchurch; a summary of the long and complicated document is printed in "The Press” today. Wide discretions are permitted to the Minister and his officers in making exceptions, both in favour of firms and against them. These powers will have to be used wisely, and with an insight into commercial affairs for which the department has not always been noted. Stringent applications of the rules might well stifle initiative among manufacturers and inhibit industrial expansion. Like most price control measures, they also allow room for inefficiency to flourish. There is, however, an inducement in them to be sparing in the employment of labour. They are clearer than some of the Government’s earlier and more hasty attempts to introduce price controls, but their application will be no less complicated.

Regulating prices in this fashion will not count for much if the Government fails to restrict wage increases on the pattern it has proposed. Even then, it must be seen that the whole fabric of controls guarantees the persistence of a wage-cost-price spiral. Only one element in the design tends to reduce the rate of inflation: business firms now are being asked to absorb some of the latest wage increase, rather than pass it on to consumers. The effectiveness of this depends on higher productivity to prevent purchasing power from running ahead of the volume of goods and services on the market Wage restraints must be a continuing part of the scheme. Manufacturers should not complain too loudly about Government restraint on their profits. For many of them, it is the penalty they must pay for insisting on protection from competitive imports. For the same reason, unions must accept wage restrictions as one of the costs of full employment