Price outlook ‘good’

Press, Volume CXVI, Issue 34147, 7 May 1976, Page 2

Price outlook ‘good’

(N.Z. Press Association) WELLINGTON, May 6. Incomes should not be adjusted for cost-of-livinff increases resulting from rising import prices, the Deputy Minister of Finance (Mr Gair) said today.

Mr Gair told a meeting of the Association of Architects and Surveyors in Wellington that much of the rise in the consumers’ price index reflected a vety substantial rise in import prices. “An understanding of this point is crucial to the success of the current < -onomic adjustment,” he said. “With import prices later this year exerting much less pressure on domestic prices, the prospects for achieving a much greater degree of price stability are good, if all sections of the community

are prepared to accept a continuation of present restraints on incomes. “Most people would be prepared to agree to such restraints — but only if all incomes are visibly and eauitablv restrained,” Mr Gair said.

“Everyone should realise that the Government’s major economic objectives are price stability, external solvency, and the accelerated growth of farm and non-farm exports. “In the future, we must not be misled as in 1973 into permitting a rise in domestic consumption and living standards because of a shortterm rise in export prices. Export price peaks are invariably temporary,” Mr Gair said.

New Zealand must ensure that overseas reserves were increased in periods of high export prices and drawn upon responsibly to maintain imports and employment when export prices fell. “The achievement of these objectives will require high standards of Government economic management, as well as a much improved public understanding of basic economic issues. “For instance, it is essential that people understand that the pace of economic expansion must be determined by the rate of growth of foreign exchange earnings, and that a massive Budget deficit is totally incompatible with the achievement of price stability and external solvency,” Mr Gair said. If the Government had not acted to reduce the Budget deficit, the consequences would have been serious unemployment . . . “because overseas leaders would have been unwilling to provide the

funds which would have enabled New Zealand to continue living beyond her means.”