Commercial End price controls says president

Press, 20 February 1979, Page 22

Commercial End price controls says president

PA Wellington Removing price control: : should be the, Govern ment s priority, says tht ; president of the Retailer’s Federation, (Mi A, C. McKechnie). He told the federation's board of directors that the Government, committed in its election manifesto to review price controls, should urgently remove "unrealistic and unprodui tive controls” and restore normal trading conditions [ to the retail sector. Since 1970, retailers have had margins controlled under price restraint regulations and have had to absorb repeated cost rises which have steadily eroded real returns on sales. Mr McKechnie said the retail industry welcomed the recent reports of the Planning Council and the 0.E.C.D., both of which had seen price and import licensing controls as two I of the factors inhibiting i New Zealand's return to a ; market-oriented economy. “If it is good enough for the Government to justify ' increased electricity charges by applying the principle of the marketplace, then the same prini cipie should be extended to our industry. “Because manufacturers have had the ability to pass on cost increases in prices, price controls have done little to hold prices, clearly' demonstrating that they do not work,” he said.

One way to slow price ,ses was to increase pro,activity. To relate wage rises to productivity growth could help slow internal inflation and also Help exporters which, if they were to compete Abroad, could not pass on the internal costs in the fame way as domestic manufacturers. To help control imported inflation, Mr .IcKechnie urged that the import licensing system be dismantled and replaced with tariffs where, necessary. Control by licensing kept the prices of many commodities artificially high, by giving importers a virtual monopoly which did not encourage the best use of licence, he said. Urgent action in these key areas would do more to slow price rises than any bid to hold them by regulations, he said. Retailing provided the goods and services in the right place and . at the right time for the consumer. The years of rigid

price controls, and the ‘ flexibility of pricing th< had imposed, had made tailers narrow their rai. of merchandise and red. their services. "Because the 'process very gradual it goes largely unnoticed until die stage is reached when retailing is in danger of losing its competitive edge, with retailers becoming reluctant to take the risks associated with skilful merchandising.” Mr McKechnie said the removal of price controls would not necessarily have a significant effect on the consumer price index. Regulations which stifled initiative and enterprise also prohibited the averaging-out of prices. “Price- control works more to keep the price of luxury items lower and the prices of basic merchandise relatively higher. The consumer of basic merchandise subsidises someone’s fur coat — that is a real, and largely hidden, effect of price controls,” he said.