P.M. hails ‘major blow to inflation’

Press, 18 February 1977, Page 1

P.M. hails ‘major blow to inflation’

PA Wellington The Government’s success in cutting the country’s deficit before borrowing is regarded by the Prime Minister (Mr Muldoon) as a major blow against inflationary 7 pressures. But the Leader of the Opposition (Mr Rowling) says the deficit should have fallen even more in view of the rise in the tax yield. Mr Muldoon said yesterday that the fact that the deficit before borrowing for the full fiscal year looked likely to be even

less than estimated in the Budget was the most significant factor in the public accounts for the first nine months of the 1976-77 financial year. The figures were published yesterday. “Unless the position is reversed in the final quarter we will have a considerably lower deficit than we expected,” he said. The Government had at first obtained predictions that the deficit before borrowing this financial vear could be as much as $l4OO million. Government pruning had produced an estimate of about $875 million, but the eventual

result might be even lower. “I hope there will be an even lower deficit next year, and our forecasts for the June year show less of a deficit.” The Prime Minister said that he was reasonably happy with the balance of payments and he was not going to introduce import control. Mr Muldoon said he was looking ahead with considerable interest to the general wage order pronouncement. He regarded inflation as the most pressing economic problem confronting the country 7, and hoped that

the Wage ’Tribunal would take a realistic view 7 of “what is put in front of it.” The wage order would be very significant in terms of the Government’s ability to hold inflation later in the year. Mr Rowling said that the latest Public Accounts did not give any cause for jubilation. They show'ed that income tax had risen 20 per cent over what it was last year and that total tax was up over 8312 million. “Adding this to the increase in Government charges of well. over $l4O million and cuts in in-

vestment of more than $2OO million, the deficit should have fallen by much more than it did.” Mr Rowling said that net expenditure fell only because Government charges rose and investment and housing were cut back. “Expenditure must rise again in the future as the grossly expensive scheme is phased in and as increases in State servants’ wages and salaries come through. “The Government must be worried about how it is going to pay for its activities this year, especially

as the Minister of Social Welfare has said there will not be any tax increases." Mr Rowling said that the boom in income tax payments showed the need for reform in this area as inflation pushed up taxes much faster than incomes. “Over all, the Government’s attempts to fulfil its election promise to cut spending have flopped as badly as its attempts to control inflation and imports. Its credibility is fading pretty rapidly.” Public accounts details, page 3.