Internal loans may modify Budget Comment from the Capital

Press, 28 May 1979, Page 16

Internal loans may modify Budget Comment from the Capital

By

CEDRIC MENTIPLAY

The Minister of Finance (Mr Muldoon) was not forthcoming when asked for “Budget hints” — Ministers of Finance are generally reticent in this field — but he did indicate in an interview that things might have been much worse had it not been for the success of the two interna! loans, which together bought in more money than either the total amount of last year’s overseas loans or this year’s expected total. Asked if all the “bad news” had already occurred ar.d if the Budget could be, after all, a relatively mild document, Mr Muldoon laughed. “You couldn’t really say that,” he said. “We are doing things as they are required now, to some extent. But I would not think there will be much more before the Budget.” The Budget date has not been fixed yet. When the dates June 21 or June 23 were suggested, Mr Muldoon said: “You shouldn’t be too far wrong.” Budget night is traditionally a Thursday. Mr Muldoon begins a world trip or June 7, during which he will have talks in

Washington and London, and will attend the Ministerial meeting of the Organisation of Economic C o-o peration and Development in Paris.

He will be chairman of a meeting of the World Bank and International Monetary Fund in Washington, where he will take part in discussion on matters relating to the annual meeting of the World Bank, to be held in Belgrade later.

In London he will have an audience with the Queen, will lunch with Britain’s new prime Minister . (Mrs Thatcher) and will meet the Secretary of the Commonwealth Association (Mr Ramphal).

The O.E.C.D. council meeting in Paris is on June 13 - 14, and if everything goes according to schedule Mr Muldoon will be back in Mew Zealand on June 17. This would give him ample opportunity to make adjustments to the Budget for delivery on June 21. If, however, details of economic and monetary movements suggest further adjustments, he could wait another week. In any case he will be in possession of the latest

information on world trends. 1 asked Mr Muldoon how much the receipt of a total of S67*JM from the two internal loans would affect future planning. He said:

“We have a certain imbalance now, in that we are experiencing very big wage settlements, particularly in the public service, in the way of back pay. There is also back pay in the private sector, and they tend to be unbalanced. In the first six months of the fiscal year (from the end of March to the beginning of September) and certainly into September, there is a very much greater rate of spending than there is collection of revenue.

“The money supply builds up. In the second half it is about even. The deficit at the end of September is fairly close to our deficit for the year.” Mr Muldoon qualified this by saying “It’s a bit less — but in the second half of the year the deficit is much less. So we have taken a lot

of money in this last loan.” I asked him how the Government would have gained this badly-needed money, if it had not decided to try for an internal loan.

“One alternative, ot course, would have been to put a tax surcharge on,” Mr Muldoon said, “We take the view that it is much better to take money in by way of borrowing than by slapping on a tax surcharge. This applies even though when you borrow you must pay interest.”

Asked to express in uncomplicated terms what exactly the Government was aiming at in its recent taxation moves and the Budget, Mr Muldoon said: “It is easier to explain what we are not aiming to do. We are not aiming to depress the economy below the present point. What we are aiming to do is keep it going at about the present level, or a bit better; because in balance-of-payments terms we believe we can carry that. We

think, theiefore, that there is no need to press the economy down and so pui more people out of work.” Questioned on this, he admitted that it was “a pretty difficult exercise, and one you cannot do very precisely.” His evaluation; “We may go down and we may go up a bit, because of ■things like confidence and so on. But all of our economic policy at the present time is aimed towards that end — together with a move towards exports." Asked how the Government was encouraging exports, Mr Muldoon said: “I have been talking to a lot of boat'd u i 1 d e r s lately — Aucklanders mostly — and have been telling them to get out and sell more boats overseas. If you sell it overseas you get the export incentive; if you sell it in New Zealand you get taxed.”

Mr Muldoon explained: “We are widening the gap

on the return on a boat sold overseas and a boat sold in New Zealand. We will be doing this in various industries, and by various means.”

He believes that the coming Budget has been his most difficult one. “We have done a tremendous lot of work on it — more than on any other Budget 1 have ever touched, by far. It has not been that there has been a large number of Budget papers, but there has been a great deal of discussion and background work. “The Budget is coming together now. It is getting very close to finality. We still have some computer work to do on total figures, and so on.

"1 believe that when the Budget is delivered, it will be seen that some of the things we have been doing in recent months make a lot more sense than they did when they were done one at a time. They are all part of a connected whole — but unfortunately you cannot do it all in one hit.

“It was not possible for me to spell it all out in one hit, as people were demanding of me to do immediately after Christmas — that is just not possible."