The light is but dim

Press, 7 August 1978, Page 14

The light is but dim

By

ADRIAN BROKKING,

commercial editor

The New Zealand sharemarket was mixed last week, in moderately active trading. Over the week rises and falls of New Zealand shares were about in balance, but on the whole there was an easier tendency.

! The weaker trend can probably be explained by I two factors: first, the market is taking a “breather,” : combined with some profit taking; second, a growing conviction that the silver lining around the dark clouds is so far a very narrow strip indeed. Some of our large companies — A.H.1., Fletchers, Winstones, to mention but a few — have been making quite pessimistic noises. On the other hand, the quarterly economic review from the Bank of New South Wales, and the quarterly survey of business opinion from the N.Z. Institute of Economic Research suggest that business confidence has ceased to decline.

However, of necessity, there is a time lag involved in those publications. In any case, the Institute was at pains to point out in its report that the “overview” of the economy was still one of pessimism. “What is clear is that any real, sustained recovery remains firmly in the future,” its survey said.

This recession is not only the most serious one since the war, it is also the most protracted. One reason for this seems to be that the wrong methods are used to try and cure it. Keynesian economics, which seemed an easy way to even out the fluctuations of the business cycle, are inappropriate to

ideal with the present reces-i ision. i i Even if it were to be con- : : ceded that the diagnoses of lour economic ills is correct, ’ i the therapy is not. The (wrong tools are being used. “The Press” was the first publication in New Zealand ; to warn readers of a coming depression. We published a leading article in December, 1973, saying that we might be facing the most difficult economic period for a gen- < eration.

We kept saying this in subsequent years, when many were scoffing and asking "wlere these bad times were. It gives us no pleasure to have been proved right — it was not such a difficult prediction to make, really — and w r e would gladly have been wrong. Nor did we seek the sensational, or enjoy being prophets of doom. The prediction was mde in the spirit of “forewarned is forei armed”: it is only realistic

to face the future, and os-trich-policy to do otherwise. It hardly needs saying that ths further the future the cloudier the crystal ball, but I am prepared to stick my neck out, and predict that the economy will not really begin to recover until next year, and that the next peak in business activity — and that likely a modest one by historical standards — will not occur until well into 1981.