BEETHAM

Press, 31 August 1977, Page 28

BEETHAM

Continuing falls in production with inflation around 14 per cent a year is the immediate future for the New Zealand economy. Until both the economic and financial systems are reformed prices will continue to rise and production to fall. Fine tuning and fiddling will no longer solve New Zealand’s fundamental economic problems. Falling production will continue to lower the standard of living and make impossible of realisation any dreams to improve the quality of. living. It is no solu-

tion to import overseas production at the cost of compounding overseas debt.

A sick and deteriorating economy will place growing social stress upon people. This will be evident with unemployment, racial tension. increased crime, family break-down and child neglect. New Zealand’s record of social stress in industry is worse than that of Britain’s. New Zealanders are al-

more than half of the total cost. It is the other half that is of interest at the moment because that half is closely related to the intensity with which capital investments by firms is used. Increased productivity by labour is being more frequently advocated by industrialists as a means of reducing costs, and this could certainly reduce the average costs of goods, but they seldom, if ever, advocate in public more intensive use of capital towards the same end.

A shortage of money capital with which to finance productive investment makes it even more important that existing investments be used more intensively by rationalising production between firms to achieve longer pro-duction-runs.

Current depressed market conditions are promoting the concentration of capital under the control of relatively more efficient firms, but the New Zealand Manufacturers Federation could help its small members avoid forced mergers with large firms by playing a greater role in bringing small firms together for mutual advantage. Unfortunately, the present administrated price system, along with protection from imports, and the protection from competition that is

■readv buying less food. I doing with’less clothing and [cutting down on other home essentials. The opportunity of home ownership is declin--1 ing for more and more. ; In spite of record and i crippling taxation, the worth of the services offered by I the Government is on the !decline. Health, welfare, edu- [ cation, transport, broadcasting and local govern'ment all face a future in | [which they will offer reduced services. j The free market economy [cannot meet the reasonable ' needs of people when it is [ twice as profitable to invest [at interest in money lending [than in production. Industries and agriculture have not the money to even replace worn out plant and maintain capital. Transport is in even worse shape. The state of New Zealand industry is shown by the continual fall in the value of shares sold on the stock exchange. [ To get the economy going iagain interest rates must be

onen negotiated between firms, do not facilitate the necessary adjustments to prices that could arise from a more efficient use of present capital, and prices will probably continue to be set to keep the least efficient in business. The level of New Zealand’s internal costs, and also transport costs to foreign markets, cannot be regarded as conducive to the sustained expansion of manufactured goods, but these exports must be increased if recent volumes of imports are to be maintained without recourse to further foreign borrowing. The economic end-use of imports, by value, in the year of June 30, 1976, shows the critical importance of imports to businesses, farmers, and consumers. In that year 28.7 per cent imports were capital goods and materials and components for capital goods; 34.9 per cent was materials for production; 22.4 per cent was consumer goods; and 13.3 per cent comprised finished capital or consumer goods. '

It is obvious that all economic groups stand to suffer from a need to reduce imports, because of continued unsustainable deficits because a reduction in any of the categories of imports would result in lower standards of living, and fewer employment opportunities.

reduced so that they are less than reasonable production profits. Lowered interest rates will also remove the thrust of present cost inI flation. Industry must be reformed iso that the co-operation of iwo rk e r-shareholding and participation replaces the [confrontation of union and [management power j struggles. | Finance must equal available resources and be able to move those resourcs into areas of social concern and need. Only fundamental financial reform can achieve this.