Commerce chambers seek inflation buffer

Press, Volume CXVI, Issue 34046, 9 January 1976, Page 8

Commerce chambers seek inflation buffer

The Chambers of Commerce have men! to do something to offset the effect of

They have written to ■the Prime Minister (Mr Muldoon), in his capacity as Minister of I Finance, saying that they are worried by predictions of a fall of 16 iper cent in private [investment between 1974 and 1977—and a consequent 1.5 per cent fall in output. ' Their letter included evidence of the effect of inflation

on renewal of stock and plant, material from a study they commissioned from the economics department of Victoria University, and a report by Mr G. G. H. Gilmour, chairman of W. D. and H. O. Wills (N.Z.), Ltd. Conclusions drawn from the reports were that money to offset inflation must come from tax-paid profits after a fair dividend has been paid out, and that long-term borrowing, retained profits, and equity capital finance expansion. The chambers said that to

pressed the Governinflation on profits.

act in any other way would only postpone insolvency. LONG-TERM EFFECTS Higher inventory costs, tax on inflated profits, and an increase in short-term funding has simultaneously reduced the cash available for longerterm investment. The letter said New Zealand’s economy and society would suffer badly and for a long time unless these problems were overcome by making investment more attractive. The chambers suggested: A deduction from assessable income of the value of inventories that exceed 10 per cent of the trading profit. The reintroduction of an investment allowance on new’ plant, the cost of which has doubled in the last five years. That companies should be able to claim depreciation for the year to March 31 on the estimated amount of their capital spending for the coming year. That a committee of inquiry consider the recognition, for tax purposes, of the cost of replacing stock and assets.