THE PRESS SATURDAY, OCTOBER 29, 1977. The economic package

Press, 29 October 1977, Page 16

THE PRESS SATURDAY, OCTOBER 29, 1977. The economic package

The economic package announced by the Prime Minister (Mr Muldoon) yesterday had limited aims and its over-all effect is likely to be similarly limited. It was an attempt to reflate the economy slightly in case the reduced spending brought about increased unemployment, which in turn would bring about even less spending. The measures were mainly for the short term; over-all the present economic strategy has been left intact. Those who have faith in it will be reassured that it principles have not been violated. The cut in the tax-rate of 5 per cent and the supplementary child benefit of §25 a child are the moves which will affect most people. The percentage tax cut benefits least those who most need more money. More spending would have been stimulated by a flat tax rebate. To some extent the §25 a child supplementary benefit makes up for that. What really needs examining is the whole tax structure and it is to be hoped that this is receiving top priority.

The Government acted soundly in not encouraging the building of houses without any guarantees that people could buy them, but the minor moves to make loans more easily available will not greatly stimulate building. The plan to make more money available for public works should provide some work for the building industry. A useful

addition to this economic package would have been a specific statement on housing policy.

Businesses should gain from three measures: the availability of finance to help hold stocks, the availability of money to help pay taxes and, most significantly of all, the lifting of restrictions on hire-purchase except for colour television sets, cars, and motor-cycles. They should also receive some help from the extra child benefit, which is likely to be spent rather than saved. The movement to an export-oriented economy should be encouraged by the further export incentives. The encouragement to the dairy industry to find alternative products is the very least that could have been done. The “export year” project is admirable in concept; it is to be hoped that some more imaginative export incentives will be offered next year.

The package should do something to keep employment up. For the other main problems facing the economy it might help here and there. It will be slightly inflationary, but unavoidably so. Exports may increase slightly, ’ but much more could be done. Early next year the Government will need to examine the effects of this mini-budget on inflation, employment, productivity and exports. Further measures may yet be required to revive flagging internal demand and sluggish exports.