‘More belt-tightening’

Press, Volume CXV, Issue 34021, 9 December 1975, Page 2

‘More belt-tightening’

<K.Z. Press Association) BLENHEIM, Decembei* 8. New Zealand’s economy will continue to contract until mid-1976, according to the Bank of New Zealand’s chief economist, Mr L. C. Bayliss. In an address to the Blenheim Rotary Club, Mr Bayliss today pointed to what he called strong evidence of a substantial cut-back from the clearly-unsustainable peak living standards of mid-1974. A further downward movement would occur in spite of the very large Budget deficit, rid this was an indication of the severity of the fall in the terms of trade. But for the Budget deficit there would have been a very substantial rise in unemployment and a fall in production and economic activity. But on the other hand, the external payments deficit would have been very much smaller. Thia question faced the new government: Bearing in mind She continued economic downturn, the inevitability of a sharp rise in unemployment, and the recent improvement in the terms of trade, was it necessary to implement policies to restrain economic activity further and reduce living standards to complete the adjustment to lower terms of trade and eliminate the external payments deficit? He concluded that substantial policies of economic restraint were not necessary, though certain economic measures were desirable.

Among the possible policies could be to cut immigration as much as was practical and to minimise labour shedding by adjusting corporate taxation to make stock appreciation (reflecting price increases) non-taxable.

While reducing expenditure a reasonable level of building, residential and business, should be maintained. Specific measures should include raising postal, railway, and electricity charges and reducing consumer and other subsidies. The last should be offset by increases in social security and family benefits. The Development Finance Corporation should be responsible for raising its funds from the public, and the Rural Bank should also be encouraged to increase its funds from the public. Housing Corporation activities should be reduced by increasing the availability of

mortgage finance from savings banks. The housing objective should be about 28,000 to 30,000 completions. There had been 34,500 completions in the year ended last March. He forecast that there would be about 31,000 completions in the year ending next March. There was no reason to suppose that the Federation of Labour would not maintain a reasonable attitude in view of the serious price inflation and growth in unemployment. "Nevertheless the F.O.L. will seek equitable controls on all incomes, not just wages, as well as on prices and profits,” he said.