P.M. says more revenue, no mini-budget

Press, 4 December 1978, Page 16

P.M. says more revenue, no mini-budget

By

CEDRIC MENTIPLAY

Comment from the Capital

News of a deferred increase in revenue, which will operate next year and which will make the application of a mini-budget unnecessary, was among the important information which, according to the Prime Minister (Mr Muldoon). he explained publicly four times in the fortnight before polling-day.

Mr Muldoon has claimed that this information was not picked up by the news media — that it was “lost” in reports of his speeches, which included attacks on the impartiality of the media and clashes with interjectors. When I asked Mr Muldoon to identify the important information which, he claimed on election night, had been ignored by the media, Mr Muldoon said that during the last three years the Government had what he described as “a total preoccupation” with the business of turning around the various aspects of the economy which were in difficulty — the rate of inflation and the external balance of payments. In the early stages, Mr Muldoon said, there was the problem of getting the Government’s balance of internal revenue and expenditure in order. But this financial year the Govern-

ment had deliberately eased its restraints — “in order to move the economy into a slightly expansionary phase.”

“As ’ with any of these manoeuvres, it is necessary to give a fairly hard jolt when you are trying 'to change direction,” Mr Muldoon said. “Thus in this year’s accounts we have a substantial deficit. It is of the order of magnitude, in percentage terms, of the deficit of 1975-76, which was there when we came in.”

His explanation of the expected financial build-up next year is interesting. He said that the earlier deficit had been pulled back in 1976. “This year we have a substantial amount of revenue going forward beyond April 1, 1979. This relates to such things as the back-pay .of public servants, where they have paid tax at the 20c in the dollar secondary employment rate, and will have to pay the balance. That is a very substantia] amount. “The stock adjustment concession for businesses is another item. They have been permitted this year to pay their provisional tax as though that was continuing. It did not continue, but they will not pay their final tax, of something more .than $7O

million, until into the new year.

“There are other items of a similar nature that will give a revenue boost to next year at the expense of the current year,” Mr Muldoon said. “It is really revenue deferred. That, plus the normal growth in revenue, that comes about through the progressive income tax system, will gradually absorb the loss in revenue, and the cost, of the October income-tax reductions and the last stage of national superannuation, which came into effect last August.” As Mr Muldoon sees it, the internal expenditure picture will gradually come right. “But there will be no room for further tax concessions or extra expenditure of any magnitude,” he said. I suggested: “On the other hand there will be no urgent necessity for a mini-budget?” Mr Muldoon said: “That is right. And this is what I have been trying to say — that the suggested minibudget for those purposes is simply not necessary. We have budgeted up to March

31 with a substantial deficit, and that deficit will have the effect of giving further stimulation to the economy.”

He said that this stimulation was becoming apparent now — still at a relatively modest level.

“We are picking up some of the excess cash on the current loan, which is heading us to the $2OO million dollar mark now,” he said. “It is tidy up until the March-to-mid-year level.” Reviewing the external finance picture, Mr Muldoon said that if the selling-season remains as it is shaping up, there skould be few problems. “External prices are good, and although the level of importing is rising as the economy picks up, it is still in good shape as far as balance-of-payments is concerned.”

He said Maui gas would be flowing “maybe in the second quarter of next year, maybe a little later.” That would have an immediate impact on the balance of payments. The development costs of Maui will run down, and the replacement of im-

ported oil will give a positive gain.

Looking ahead into next year Mr Muldoon’s verdict is “not too bad.” The Government proposes to take advantage of this to implement the policies of restructuring which started from a recent report of the Planning Council.

These suggestions and recommendations are now with the departments, starting with Treasury. The various aspects of the report have been sent out for consideration, and will be reported back before March 31 next.

“We shall move as is appropriate,” Mr Muldoon said. “This is based on our over-all analysis that we have to move resources into new export areas, or export areas which are expanding, such as fishing, horticulture, some aspects of forestry, and the traditional exports and methods of processing them.”

The expansion will include manufacturing of various kinds, marketing, marketing

aids such as the Bahrein operation. All of these things are encompassed in the report of the Planning Council, as it came out some two months ago. “This involves more than just the movement of resources.” Mr Muldoon said. “It involves manpower, training and retraining programmes. particularly for young people, and the provision of capital.” Mr Muldoon expressed considerable interest in the fact that small savings rose by $9OO million in the last three years. “That is $3OOO dollars for every man, woman and child—at a time when people thought things were very tight,” he marvelled. "I suppose one of the reasons for the downturn was that people stopped spending and started putting their money into the savings banks Nevertheless it is there. . . .” He said that there would be a continuing overseas borrowing programme. “We have some big maturities in the next three years. These have to be refinanced—but there is no difficulty about raising the money.

“They will not alter our debt service ratio, because in many cases they will be financed at lower interest rates than the original loans,” he said.