Bad news for N.Z., says Mr Muldoon

Press, 29 November 1976, Page 1

Bad news for N.Z., says Mr Muldoon

PA Auckland The devaluation of the Australian dollar by 17| per cent was “bad news” for New Zealand in terms of the fight against inflation, said the Prime Minister (Mr Muldoon). He would not say if Nev.' Zealand would also devalue. A Cabinet meeting tomorrow morning would heard reports and analyses before making any definitive statements.

He said that if New Zeadid not move with the Australian devaluation, Tasman trade would be "seriously affected.” But if New Zealand did move, it would increase the price of imports and add to the inflation rate. Two factors had been worrying him. One was the possible increase in the price of oil by the Organisation of Petroleum Exporting Countries; the other was the general wage order to be sought by the Federation of Labour. The devaluation added a third dimension to the fight against inflation, he said.

The immediate effect, he was to turn the balance of

the Tasman trade against New Zealand—and that was an immediate adverse effect “on our flourishing trade in manufactured exports.” Mr Muldoon said the Australian dollar had not been over-valued, and he had been told that it had been devalued because it had been subject to a considerable amount of speculation. Australia’s devaluation was a jolt for New Zealand exporters, the Leader of the Opposition (Mr Rowling) said from his Richmond home last night. “It will clearly impose difficulties of a quantitative nature which New Zealand manufacturers are already facing in what is a traditional market,” he said.

“The move will also give Australian importers a comparative edge on New Zealand in third markets where we are in competition. Any advantage from reduced import costs in New Zealand dollar terms is likely to be dissipated by the general inflationary movement and the further deflation level of the New Zealand dollar which will arise from our currency basket in which New Zea-

land is tied to a series of other currencies.”

Asked if he thought New Zealand should now devalue, Mr Rowling said while he could see some advantages there would also be disadvantages, and he would have to weigh these together. New Zealand must devalue its dollar about 10 per cent in response to the 17| per cent devaluation of the Australian dollar, said the director of the Canterbury Manufacturers Association (Mr I. D. Howell). He said that if the Government did not devalue, the effect on New Zealand manufacturers would be severe, because Australia was their major market. More than 40 per cent of manufactured export goods went there.

“I can’t say a great deal until our Government moves, but it will have to take some action, and any devaluation would have to be about 10 per cent,” he said.

“There are many local manufacturers in a fairly competitive situation at the moment who will be priced off the market if we don't reply, and this is our main concern.