Govt keeps ‘tight rein’ on imports

Press, Volume CXV, Issue 33917, 9 August 1975, Page 2

Govt keeps ‘tight rein’ on imports

(New Zealand Press Association) WELLINGTON. August 8. The Minister of Finance (Mr Tizard) regards the monetary policy being enforced by the Government as an exercise in “fine tuning” of the economy.

In an interview today, he said the Government’s objective was to damp down imports and also maintain a high level of domestic manufacturing.

“Our aim is to ensure a slow but steady liquidation of stocks without inducing any panic, so that importers adjust to holding six months level of stocks, rather than up to nine months as they are accustomed to in times of prosperity. “It is imperative, however, that we can make it clear that importers who might think of over-ordering in preparation for the Christmas holiday season are not going to get away with an exercise in smart practice.” The message the Government was seeking to give importers was that monetary policy would continue to be on a tight rein, and was likely to get tighter before any easing took place. The savings banks were now picking up a good level of deposits, and this was a help in preserving a satisfactory flow of finance, particularly for the housing industry 7 .

Building permits were running at a rate of about 30,000 yearly, and a surge had been noted in the number of people wanting to build large houses, or flats, or add to existing homes. Mr Tizard said the level of private savings was holding up quite well. By not changing its security ratios for these banks the Government had indicated its desire to keep private sector financial institutions active—"and profitable.’’ .

“We’ve got to do that,” said Mr Tizard. “We don’t want to channel all savings through State institutions.” Mr Tizard indicated that he was concerned about the sums now being held by financial institutions. He said the Government had tightened their security ratios in the hope that a reasonable portion of their current holdings would be set aside for investment in Government securities when the tightened ratios came into effect.

“We hope this will put finance houses into something of a holding pattern in the meantime. We do not want to see them going on increasing their lending in the current situation.” Mr Tizard said Government figures had shown that farmers were not borrowing heavily at the moment. This was a factor in the freeing of available capital for other sectors of the community. The entry of the Development Finance Corporation into the borrowing market would inject an element of competition. The Corporation’s activities would provide secondary industries with an opportunity to get money for expansion projects at reasonable rates.

On the other hand, however, there would be increased competition for savings banks and financial institutions seeking to attract savings capital for their own investment programmes. Mr Tizard indicated a belief that the cost of housing

finance would probably show a downward trend on the open market, and added: “We’re trying to encourage competition in the uncontrolled free market, and the interest rate situation will be worth watching in the next few weeks."