‘Saner thinking possible’

Press, 29 November 1976, Page 1

‘Saner thinking possible’

The Australian devaluation should emphasise that the best chance of New Zealand balancing its overseas transactions lay in primary produce exports. These would include timber and fish as well as farm products, the chairman of the Meat Board (Mr C. Hilgendorf) said last evening. The change in the exchange rate resulting from the Australian devaluation would have a clear effect on manufactured exports, which had boomed because of the favourable exchange rate New Zealand had eijoyed with Australia.

This could result in a return to more common-sense thinking by those who had looked to manufactured exports to solve New Zealand’s balance-of-payments problems. Mr Hilgendorf said that he did not think that the devaluation would benefit Australia cotnpetitivelv in overseas beef markets where New Zealand beef is also sold.

The world beef market was a buyer’s market and Australia had been in such dire straits to sell beef that she had to sell at any price.

And Mr Hilgendorf did not think that the devaluation would have much effect on the market for mutton either, which was also a buyer’s market. But the Australian producer would receive more.

As for lamb, he expected “no effect at all.” New Zealand’s beef exports to the United States were likely to be the farm exports most affected by Australia’s devaluation, the professor of marketing at Lincoln College (Professor W. O. McCarthy) said last evening.

But he expects that New Zealand will also devalue by 8 to 10 per cent. '“lt will shatter the newly built up substantial flow of secondary industry exports to Australia unless New Zealand devalues,” he said. However, New Zealand should not devalue, he said. “Apart from productivity, our single greatest problem is inflation, and we cannot really afford to devalue at all.

“But I believe that a political decision will be made to devalue as manufacturers will create such a stir that the Government

will have to make some significant gesture.” Professor McCarthy said that it would make Australian primary products more attractive in markets in which both Australia and New Zealand competed. The major market for New Zealand which would be affected would be the beef market in the United States. The markets,for Australian Merino wool and New Zealand crossbred — the bulk of the wool produced

in New Zealand was cross bred — were somewhat different, so the effect here would not be very great. Similarly, Australia was not a very large exporter of dairy produce, so New Zealand’s dairy produce exports would not be much affected. The cost of imports from Australia would decrease as would the effect of these imports on inflationary pressures in New Zealand and farmers could benefit to a small extent.