Revolutionary changes

Press, 5 August 1976, Page 16

Revolutionary changes

Commercial

After 30 years of restrictive controls which had distorted the New Zealand financial system, the last year has seen a revolutionary change in our monetary policy, says the retiring chairman of the New Zealand Bankers’ Association (Nir John Mow bray).

This was the greater free-1 I dom given to trading banks to I (set interest rates, both for| deposits and lending. Because the changes were; I so dramatic , the new situs-; lion will take some time to settle and, of course, the distortions of many years cannot be corrected overnight, Mr Mowbray says. "However, we believe that i the new policy is already producing a better and more effective allocation of New Zealand’s financial resources, and given the need for this in our [present condition, it must be considered a bold and successful step. This success might well recommend a further change: a more active Government interest rate 'policy which might also achieve a measure of better I

[control by the authorities ! over the whole financial sector > “This has also been a year ! in which New Zealand camel (to a full realisation of the| iproblems it faced, from in-i flation, over-spending bv the! State, and the imbalance in its' overseas accounts. “These problems are made worse by our terms of trade, which, according to the latest statistics, are around 70 which is a depressed level, I "Although there are wel-i come signs that the world is| coming out of the recession) of the last two years. New! : Zealand’s economy and in) particular its consumption expenditure must remain under) tight control until the pur-j chasing power of our export' income improves, that is,j until the terms of trade imi prove. Substantial planning'

Hand effort will be required - in the marketing of exports and allied policies if we are to r . redress the situation. !, “Escalating transport costs iiare another problem which is [accentuated by New Zealand’s ■ ■ relatively’ isolated geographical situation and its diversified markets. These costs i have a major effect on our . terms of trade and the situ- ■ ation demands urgent study I to see how their effect can jbe reduced. ■ “New Zealand is fortunate ;|in having an efficient and exit perienced trading bank svs- ■ item with overseas offices, and i)a network of agents through•|out the world. Given encour•jagement to do so, I am sure •{that this system can make Jan even greater contribution .[to the marketing of our exports in established and new ['markets,’’ Mr Mowbrav says.