Import fall to justify Government policy

Press, Volume CXV, Issue 33753, 28 January 1975, Page 18

Import fall to justify Government policy

A sarp fall in imports would justify the assumptions underlying the New Zealand Government’s policy “that we can come through the next year (1975) or so without stringent deflationary measures,” the ANZ Bank says in its latest quarterly survey.

However, the need for a conservative assessment of prospects cannot be overstressed, the bank says. In 1975 the economy might operate anywhere between two extremes.

First, there is the worst possibility—failure to achieve a quick reduction in import payments and no recovery in export prices later in the year. This would lead to further deflation of the economy and a seripus (by New Zealand standards) domestic recession.

Secondly, and more likely, the overseas sector will strengthen. imports will fall, and hopefully, as 1975 progresses, meat and wool prices will show some recovery.

The pending election and the Government’s desire to maintain employment and growth will see a relatively orderly transition to slower growth. Even if the more expansive

alternative is realised, the adjustment to more normal conditions, after a boom, will not be easy. The chances ,of an early return to buoyant demand conditions are virtually nil, the bank concludes.

Before reaching these conclusions the bank states that New Zealand has entered a period—possibly a protracted period—of slow growth.

Whether serious reces- ; sionary conditions develop [depends very largely on developments overseas. According to the bank, the : future for exports is heavily influenced by world trading ; prospects. Imports over peak? Only slow growth will occur in the developed nonc.ommunist world throughout 1975 and therefore any early improvement in New Zealand’s balance of payments is likely to depend mainly on

reducing the level of import payments. The bank suggests that the volume of imports should have reached a peak in the December quarter of 1974 and could decline quite significantly, but sounds a note of caution: “Whether the dollar values fall to the same extent remains to be seen.” Future prospects In spite of rising non-farm incomes, a comparable growth in expenditure is unlikely, given the impact of I the progressive tax scale and price increases.

Moveover, the coincidence lof reduced demand for stock! building and a slowing in re-i tail sales reinforces the likeli-; hood of a decline in imports. ‘

Prosects for investment spending, the other major determinant of imports, also* point to an end Several factors are slow-1 ing investment spending, the 1 most important being increas-, ing uncertainty concerning; future prospects. |