Mr Muldoon’s future may hang on Budget

Press, 18 June 1979, Page 1

Mr Muldoon’s future may hang on Budget

Thursday's Budget is acknowledged by the Prime Minister and Minister of Finance (Mr Muldoon) as being the most difficult of his career. To attempts to evolve a long-term economic strategy designed to carry Nev/ Zealand past the second millennium will be added touches of pragmatism dictated by the instability of oil prices and the impermanence of trade prospects based on moves by the European Economic Community. Freshly back from his overseas mini-tour, Mr Muldoon might be expected to have absorbed some of the thinking of the new British Prime Minister (Mrs Margaret Thatcher) as deployed by her Chancellor of the Exchequer (Sir Geoffrey Howe). But the New Zealand Budget was almost completed before Mr Muldoon left home. The British solution has been to reduce income tax while doubling duties on goods and services. As well, there have been the British panacea of valueadded tax, cuts in departmental expenditure, and a sharp rise in lending rates. Cynics may say that Mr

Muldoon has increased duties at one end, without the necessity (so far) of lowering income tax at the other. Also, New Zealand interest rates have risen: Government loans at up to 12 per cent are still drawing New Zealanders’ savings. This huge internal borrowing is part of the new restructuring system: but all that Mr Muldoon has said so far is that had it not been for the money (some S7OOM) raised by the internal loans “we

would have had to put a surcharge on income tax.” Thursday’s “difficult” Budget has had modern economic planning. Budget analysis and initiative have been largely taken from the hands of Treasury officials. It will follow long examination and correlation by members of the so-called “think tank” in the Prime Minister’s own department, plus the parallel efforts of organisations such as the Planning Council. It almost seems to have

been a Government fixation to “look on the gloomy side.” But there is also restrained optimism. The Associate Minister of Finance (Mr Quigley) and the Deputy Minister of Finance (Mr Templeton) do not seem cast down. This Budget is crucial to Mr Muldoon’s political future: it will answer or confirm doubts arising even in his own party, and will reflect in Christchurch at the National Party conference, so soon after Budget night.

So what may be expected next Thursday evening? Here is a summary of possibilities: —Backing for a firm cutting of Government expenditure, especially in education, welfare, and health. This may be no more than 3 per cent over all (partly counterbalanced by expected wage increases), but will also run against the loss of purchasing power. —Further increases in postal charges (about 10 per cent).

—A reduction of assistance to farmers, possibly for fertilisers and transport. —A helping hand to exporters, as indicated in the “discussion papers” disclosed in Parliament recently by two Labour members, Messrs R. W Prebble and R. O. Douglas. —A firm restriction on the amount of money New Zealanders may take on indefinite trips abroad. This relates specifically to the “undisclosed balance” that is worrying the Government. — The controversial travel tax in unlikely to be abandoned except in favour of a money-restric-tion. —A last-minute adjustment could bring positive statements on earless days, plus a broad hint on early rationing Of petroleum products. —Further imposts on alcohol, cigarettes, and petrol may be expected. Many citizens have been expecting these for some time, if only because of memories of the 1958 “Black Budget.” However, this sort of increase need not be tied to the formality of a Budget.

By

CEDRIC MENTIPLAY