Budget nerves creep up on the nation

Press, 28 July 1976, Page 1

Budget nerves creep up on the nation

By

CEDRIC MENTIPLAY

AX ellington

Apprehension is the state of mind in which most New Zealanders await the presentation of the Budget on Thursday night. Few clues on what is in that document have been available.

Because of its timing in the threetear political pattern it i« a Budget least likely to he tainted with party politics. Because of its late production, and the amount of work done on it by many persons over more than six months, it may be one of the best informed Budgets in New Zealand’s history. The Prime Minister and Minister of Finance (Mr Muldoon) has consistently refrained from amending his early diagnosis of "tears, toil and sweat." Indeed, when overseas reports have indicated a lifting of the international economic clouds he has usually managed to produce a counter-argument. The main challenge, as he saw it in his last months in opposition, was in the amount of overspending in trade u ith the rest of rhe world The National Government has made positive moves to correct this; but the latest figures still indicate overspending. The current account, deficit at June 30 amounted tn S7O4M in overseas ex change transactions for the June year. This is SI7M better than the figure for the May year, and some 5363 M Setter than for the June, 1975, year. It might be a sign that steps already taken are having their effect—but nobody has told us this yet in definite terms. Mr Muldoon’s pledge to reduce imports had a high priority in his election policy. It is plain Iv prov-

ing harder to fulfil this titan he thought. Though the current account deficit for June was clown on the figure for June, 1975—65 M as against $B2M —it was a sizeable figure. higher than those of recent months. The difficulty appears to be that some of New Zealand’s export-producing industries rely entirely on materials and manufactured components which have to tie imported on u. still-rising market. In his speech to the National Partv conference at Rotorua on Saturday the Minister of Overseas Trade (Mr Talboys) admitted this. Mr -Talboys also hinted at a support scheme to help exports, and more particularly a means to reward efforts by primaryproducers and manufacturers alike to increase exports. This might be merely a refinement of the RowlingTigard slogans of last year —to “farm our way” or “manufacture our way” out of economic trouble. It may, however, be quite a bit more. In short terms, however, the evidence shows that New Zealand is still living beyond its means, and that the restraints imposed by this year’s mini-Budgets may not have been sufficient. Only Mr Muldoon and his advisers know the answer to this one. It depends entirely on the time allocated for recovery. It may be accepted that Government policy is to boost the growth of manufactured exports and expand the production of primary exports. The primary’ products situation is regarded as critical because of over-dependence for economic recover/ on an

increase in prices for primary products at. their existing levels rather than on boosting the volume of such exports. An uncomfortable indication of likely increases tn taxation on salary and wage-earners is noted m the frequency with which Government members, including Mr Muldoon, have emphasised the financial gains of wages and salary earners compared with those of farmers and companies during the last three years. These figures were first put out by the Institute of Economic Research. They were promptly seized on by the Government and have been publicised since. One such Nationalsponsored publication says: “The figures show that, over the last three years, the wages and salaries share of private income rose appreciably. Farming incomes were halved, company incomes fell, and rents, pensions, interest, etc., barely held their own. This publication concludes: “Unfortunately, unless there is a positive realisation that national economic stability is dependent upon real personal sacrifice, the full remedial effect of the Government’s measures will not be known.” So any firm Budget, forecast must include the probability of higher personal taxation, a measure of relife for farmers and possibly in company taxation, the extension of special rewards for exports both in the primary and secondary production field—and, of course, the laying-out of the early stages of the national superannuation scheme.