Meat Board dislikes Govt scheme

Press, 12 August 1978, Page 22

Meat Board dislikes Govt scheme

The Meat Board does not like the Government’s supplementary minimum prices scheme announced in the Budget. In the latest issue of the “Meat Producer,” the board’s monthly journal, the chairman, Mr Hilgendorf, says that while the board supported the need for financial incentives to restore farmers’ confidence and their ability to expand output, it nevertheless felt obliged to inform producers of its concern over the effects the Government’s recent Budget decisions could have on the future effectiveness of the price smoothing scheme. The board had fully discussed the Budget proposals and had decided to release for the information of producers the full text of the minute recording its views, says the statement. The text of the minute was as follows:— “The minimum prices set out in the Budget were well above present minimum prices — in the case of cow beef the Government’s minimum price was even above the present trigger price. The implications of this were that the scheme could no longer claim to be selfbalancing, that the ele-

ment of Government subsidy would be large (on paper at least), and the scheme was likely to end up with Governmentdictated prices after the end of the two-year period mentioned in the Budget. “The board felt that it should express its disapproval of the idea of supplementary minimum prices and inform ment that, although it would do its best to administer the scheme, it could not promise to overcome all the problems of administration which might arise. Any addi tional costs of administering the supplementary minimum prices scheme should be borne by Government. “While the board appreciated the need for financial incentives to expand meat production, it disagreed strongly with the particular method chosen and decided to record its main objections to the Budget decision, as follow's: “(1) The present mar-ket-oriented, self-balancing price-smoothing scheme will be superseded for at least two years by guaranteed supplementary minimum prices apparently unrelated to market realisations or prospects; “(2) The scheme, thus

becomes one of income adequacy, not of pricesmoothing, and could lead to governments of importing countries charging New Zealand with subsidising its meat exports and consequently applying some form of countervailing action: “(3) Inflation is one of New Zealand’s most serious economic problems and the unrealistically high minimum prices will tend to reinforce inflationary trends; "(4) Because of the great importance of farm production in New Zealand, generating a very substantial proportion of GNP, the board doubts the Government's ability to sustain for very long a price support scheme which is unlikely to bear any relation to market realisations; “(5) The maintenance of supplementary minimum prices unrelated to the market could, within a short period, distort the relative profitability of different products and therefore lead to distorted patterns of production; “(6) The history of schemes which attempt to stabilise prices shows that, in the long run. they also lead to stabilised production.”