'No easy task’ for Govt

Press, 30 November 1978, Page 3

' No easy task’ for Govt

Mr Bayliss said he expected that the Government would make the elimination of current account deficits on overseas exchange transactions by 1982 one of its primary economic aims. This would not be an easy task considering the likely size of next year’s deficit. On inflation, Mr Bayliss said the consumer price index might well fall to about 10 per cent by the end of this year. But the chances of maintaining 10 per cent were poor in view of recent substantial wage increases, a ; cost-plus price controlled 11 environment, rising meat i prices, and the probable [ need to contract the present 1 large Budget deficit. “The consumers’ price 1 index could well be around an 11 to 12 per cent annual increase in 12 months time,” he said. On unemployment, Mr < Bayliss said that there were ' now 50,000 registered as . unemployed or employed in special works, while there [ was a net migration outflow of about 30,000 a year. , “It seems unlikely that < employment will rise over 1 the next year. Therefore some further increase in i unemployment or a continued high net migration ;

outflow or both appear; : likely.” Concerning productivity, [ ; Mr Bayliss said New Zea-j land had a nil productivity; : growth over the 1974-9; period after averaging 1.5 • per cent to 2 per cent l growth in the previous two, or three decades. “The worst record of any; O.E.C.D. country,” he said. “New Zealand’s disastrous productivity performance reflects bad economic management over many years, particularly an over-concentra-tion on short-term issues [ and a total neglect of proI ductivity. [ “It is" because of this very I poor productiviity that New Zealand has slipped so badly by comparison with other countries in relative living standards — and will continue to do so unless there are major changes in econ- 1 omic management or a major resource discovery I such as oil,” he said. New Zealand need not ex-1 pect any economic miracles; such as an upsurge in world economic activity. Only moderate rates of growth were in prospect for world trade, and no shortterm improvement in New; Zealand’s terms of trade! were likely. “Government economic policy will have to be for- 1

■;mulated within the same [adverse terms of trade as .[have characterised the New -[Zealand economy over the [last four years. ? “New Zealand certainly--11 needs a firm monetary and : l fiscal policy and as much [wage restraint as can be I achieved. But much more is required if we are to increase productivity and j 1 achieve a viable and inter- 1 ■ nationally competitive econ-1 ■ omy capable of providing! ■ the jobs and living standards! ■ which is the primary aim of | economic management,” Mr I Bayliss said. “New Zealand requires aj structural change in economic management involving I less protection, more com-1 petition, less detailed! bureaucratic intervention, fewer producer subsidies — in short an environment [where market prices ensure i an efficient allocation of our [scarce resources of capital [and skills. I “There is no denying that the Government faces formidable problems for which there are no simple solu-l tions, either politically or! economically. [ “To tackle these problems; I requires a great deal of skill,! I determination . . . and political courage,” Mr Bayliss