Govt easing energy problems – P.M.

Press, 22 June 1978, Page 4

Govt easing energy problems - P.M.

PA Auckland A big increase in the price of imported oil was ruled out yesterday by the Prime Minister (Mr Muldoon) but he emphasised the continuing need to find alternative energy sources. In an address to the Auckland branch of the Society of Accountants, Mr Muldoon said that no further big oilprice increases were expected, a reference probably to this week’s decision of the Organisation of Petroleum Exporting Countries to freeze prices for the"remainder of this year. However, energy remained a big problem with an oilimport bill of SSOOM a year, compared with about S9OM in 1973. The difference was roughly the size of the current year’s external deficit. "Accordingly, both last year's Budget and this year’s Budget have wide ranging proposals for the conservation of energy and the use of alternative forms of energy,” said Mr Muldoon. These measures would have a considerable effect in the next few years. They would give added insurance against the very serious energy problems which were likely to arise in the middle 1980 s when total world oil reserves were forecast to come under considerable pressure. Much of Mr Muldoon’s

address was devoted to the thinking behind this year’s Budget and its likely impact on the economy. The main thrust was that the Govern ment had corrected the mtu'. serious imbalances present in the economy when the Government was changed.

There had been some over-correction “so that what was required was i.ot further measures of restraint but further stimulation.” The annual overseas exchange deficit had been reduced from about SIOOOM to SSOOM for the June, 1978, year, with an estimated SIOOM improvement in the June, 1979, year. With other factors, including Maui gas coming on stream, the external deficit would be down to “a manageable level in line with the kind of deficit that we had during the middle 19605.” The measures in the last six months and in the Budget would move New Zealand back to a lower level of unemployment, a higher level of production, thus cutting imports of raw materials and components, and more exports, particularly of manufactured products.

Mr Muldoon defended his Budget statement that the inflation rate was down to about half that at the time of the change of Government.

i It was obvious when the ; wholesale price index had : risen by only 1.4 per cent in i the fourth quarter of last year and the consumer price . Index by only 2 per cent in : the first quarter of this year i that the annual level was down to no more than 10 > per cent, compared with 16 : per cent when the Govern- : ment had changed. The Budget statement that inflation was roughly half ■ that at the change of Gov- • crnment referred to the 2 i per cent increase in the first quarter this year compared with 4 per cent in the corresponding quarter two years ago. This was a better comparison than taking last year compared with a previous year “because what we are concerned with is trends and the position at the present time.” Because of the movement of seasonal food prices he expected the second quarter this year to be slightly higher than the first quarter. However, subject only to wage settlements, the remaining quarters of 1978 would be at a lower level. “This means that with considerable idle capacity in industry the Budget could stimulate activity without creating any new inflationary pressures which would send us back into the 15 per cent plus area,” said Mr Muldoon.