‘Academic economists’ draw P.M.’s ire

Press, 25 May 1977, Page 2

‘Academic economists’ draw P.M.’s ire

PA Wellington The Prime Minister (Mr Muldoon) has advised “academic economists” to direct their advice to their “long-suffering students” instead of "confusing innocent citizens.” “When it comes to economic management by the Government, I have little time or patience with academic economists," he said yesterday, in an address at the opening of the Insurance Institute Of New Zealand’s annual conference. Mr Muldoon said that one of these economists had recently said the Government was heading for a devaluation.

“We have not the slightest intention of altering the value of the New Zealand dollar, in the absence of major moves in the values of other currencies, and it would suit me if academic economists directed their advice solely to their longsuffering students rather than broadcasting it to the news media, and confusing innocent citizens,” he said. New Zealand had recently applied 28 per cent of Gross National Product to capital investment — the highest level in its history — and this was causing economic problems, Mr Muldoon said. About 24 per cent had been recognised as a longterm normal level for capital development, and the extra 4 per cent amounted to between S4OOM and SSOOM a; year. The overseas content of this was more than SIOOM. Mr Muldoon said that the Government had reduced the annual deficit in the over-

■ seas current account from ;SIOOOM at the time of the change of Government to 'just under S6OOM. A reasonable figure today would probably be between S3OOM and S4OOM, he said but because of the high rate of capital development another SISOM had to be added to that.

M. Muldoon said that some of the abnormal items of capital expenditure with a high export content, such as the Maui development and its associated power stations, would produce wealth in the future, and New Zealand’s reliance on imported oil would drop from more than 60 per cent of total energy requirements to between 35 and 40 per cent. “In the meantime, it requires some very sophisticated analysis and calculation to see whether our current account at the present rate of deficit is sustainable, or whether it should be further reduced at some damage to the economy and at some quite considerable increase in the level of unemployment,” he said. _ However, Mr Muldoon said that the Government did not intend to extend import restrictions. “We would diminish production and, indeed, productivity, we would cause a rapid rise in unemployment, and the capital development which appears to be the main cause of the continuing level of our current deficit cannot be stopped in its tracks, and must continue to completion in any case,” he said.

Consumption was not ris-

ling at the rates permitted by> the Labour Government, “so that in a sense we are already much nearer to living within our income.” The Government had restored New Zealand’s Triple A. international credit rating, and international banks were queueing up to lend money. Mr Muldoon said that the Government had been able to reduce the interest rate for the recent Deutschmark loan, orginally offered at 6.5 per cent, to 6.25 per cent, compared with the 9.75 per cent paid by the Labour Government for Deutschmarks in 1974. "At that rate, it is worthwuile borrowing for What is, in essence, capital development,” he said. Mr Muldoon accused the Labour Government of responsibility for a virtual doubling of house and farm prices through “the crazy policies associated with the 1973 boom, the huge increases in wages and salaries, and the ill-conceived property speculation tax.” In another jab at his opponents, he said: “The Speech from the Throne last week made it clear that New Zealand is going through its most difficult time economically since the Depression of the 19305, and my political opponents who, starting last Friday and continuing from now on, will fill the air and the news media with their wailing, weeping, and complaining, are taking the intelligence of the average New Zealander very cheaply if they think that he does not realise and understand that fact.”