The Press MONDAY, JUNE 2, 1975. The O.E.C.D. view of New Zealand

Press, Volume CXV, Issue 33858, 2 June 1975, Page 12

The Press MONDAY, JUNE 2, 1975. The O.E.C.D. view of New Zealand

The opinions of informed outsiders can sometimes help to clarify complicated and difficult issues. New did not need a report from the Organisation for Economic Co-operation and Development to know that its greatest problems are inflation and a growing deficit in its balance of payments. The difficult is not tn identifying the problems, but in deciding what to do abdut them. The O.E.C.D. report suggests that New Zealand’s range of options is rather small. Unless the country takes measures which have the general approval and confidence of its main trading partners, any policy is likely to be self-defeating. The 0.E.C.D.. an outgrowth of the countries in Western Europe once associated with the Marshall Plan, has been called the “ rich men's Club ”. New Zealand is the most recent of the orgsnisation’s 24 members: the others include all of New Zealand’s main trading partners. The organisation was formed to promote economic growth; higher tiring standards, and international trade. While the O.E.C.D. has no formal power to discipline its members, no action by one member which runs counter to the wishes of the others is likely to succeed for long. The O.E.C.D. recommendations for New Zealand can be stated simply. Exports must be diversified by promoting greater efficiency in industry and by means of “ substantial inflows of long-term capital from abroad.".. As almost all that capital would have to come from O.E.C.D. members. New Zealand obviously heeds the organisation’s good will if it is to accept the prescription. And New Zealand needs “ more effective policies to iron out the sharp fluctuations in domestic incomes and demand which are induced.by the volatility of export receipts”: in other .words, an export incomes stabilisation policy. The O.E.C.D. concedes that “ there are likely to be budgeting costs attaching to such schemes under present circumstances”. That is, when farm incomes are seriously depressed other taxpayers will have to provide the capital to get a farm incomes policy off the ground. But from the 0.E.C.D.. and especially from some of its members including the United States, come warnings that any policy which smacked of support for primary production that meant unfair competition for other O.E.C.D. producers, would bring retaliatory action. The dumping of farm produce wins no friends. The most that farmers should hope for is financial help now which will have to be off-set against better returns .in.the future. This attitude is not far removed from the policies being canvassed at present by Ministers in New Zealand. It begs the question of how best to provide continuing incentives for primary producers: it does not determine what relation any system of guaranteed prices should bear to the incomes of the pest of the community; and someone has to decide how far those who do not work on the farms, bul are 'to the transport and processing industries and depend for their Living on farmers’ productivity should, be prepared to have their incomes adjusted to match export income. In the past, unions have been quick to claim a share in rising returns for exports’., Logic, though not human nature, argues that they should accept their share of a decline in export earnings. In fact, they are probablj responsibly for.neither the rise nor the decline. As for the farmers, they will not welcome greatei control of their incomes—es-pecially in the good 'Bars. • . ■ .. ■ Increasing dependence on " foreign investment expeeiafiy if it is accompanied by insistence on the efficient use of capital and labour, may disturb many trade Unions. But these are. probably, necessary elements in further economic development “ Development” alone is no longer regarded as an unquestionably desirable goal, but, as the O.E.C.D report'points -out, ‘‘if more resources are to be made available to tackle wider social objectives more economic growth in the medium-term would seem -essential ”. At the very least: the O.E.C.D report suggests that the Government’s success in insulating New Zealand from the worst effects of the international slump may be an illusion. The real crunch is probably still to come, perhaps when the Government attempts to borrow more this yeai in an international money market whose confidence in New Zealand will be influenced by such formal judgments of our performance as the O.E.C.D. report has offered. New Zealand needs the help and understanding of its colleagues in the O.E.C.D Maintaining that good will should be an important object in the next-few months.