THE PRESS THURSDAY, JULY 8, 1976 New Zealanders in debt

Press, 8 July 1976, Page 20

THE PRESS THURSDAY, JULY 8, 1976 New Zealanders in debt

Few politicians have matched Mr E E. Isbey’s impressive way of drawing attention to the scale of New Zealand’s overseas borrowing. As the Labour member for New Lynn, Mr Isbey told Parliament that the Government’s borrowing programme and authority given for private borrowing overseas in the last seven months had reached a level at which New Zealand’s indebtedness increased at the rate of “ one dollar a day for every man, woman, and child in this country ”, Mr Isbey’s calculation of the increase in overseas borrowing is astray; but it is not so far astray as to destroy the effect of his connection between what is happening nationally and what it means to individual people. Sooner or later, the people pay. A few days after Mr Isbey had said that the Government had borrowed 5550 million and had given authority for more than $l5O million of private borrowing, the Minister of Finance (Mr Muldoon) supplied the Government’s borrowing figures to the House. Since December 1, 1975, the Government and its agencies have arranged loans, and the Government has given authority for private borrowing. The total for all these loans and authorities is about $450 million. Some of the loan authority has not been exercised, and more than $l4O million has been borrowed to repay previous loan commitments. The net result is that New Zealand’s indebtedness abroad has increased by about $3OO million. This figure must moderate the force of Mr Isbey’s calculation, but it makes very little difference to the general effect that Mr Isbey’s remarks should have. When this indebtedness is added to the increase in borrowing since the middle of 1973 some of the truth of New Zealand’s economic plight is much more fully exposed. May, 1973, is an important date in New Zealand’s

economic history; our official reserves reached an unprecedented peak in that month. It was also a turning point towards an economic crisis. By the end of last year our overseas reserves had been reduced by half —to $546 million. In the same period New Zealand’s indebtedness to banks and other institutions overseas increased by about S2OOO million. The only serious fault about Mr Isbey’s complaint is that he did not make it earlier; what has been borrowed in the last seven months may be onerous; but much heavier straws were added to New Zealand’s back in the preceding 18 months. These will have to be removed in the next few years. In 1979 and 1980 alone, some $9OO million in principal and interest will have to be paid—or refinanced—to dispose of loan commitments made between 1973 and the end of 1975. Rather than face the consequences of restraining growth in the economy, the last Government chose to face the consequences of not restricting spending. The consequences are all the harder to face today: but, on the evidence of overseas borrowing, they are now inescapable. The rate at which New Zealand is borrowing money to pay for imports has declined this year. Although better prices for exports have helped, the Government has also been acting on the idea that Mr Isbey expressed belatedly but well. Even the last Government knew the truth of the matter and gave an undertaking, privately, to the International Monetary Fund that it would “ limit domestic activity ” and “ contain the growth in demands for imports ”, The main objection to the Labour Government’s intentions —even its private intentions—is that they were formed too late. Mr Isbey should have done his sums more than a year ago.