Dollar goes down

Press, 22 June 1979, Page 1

Dollar goes down

Mr Muldoon departed from the written text of his Budget to announce the 5 per cent devaluation of the New Zealand dollar from midnight last night. He said the decision was necessary to enable a new system of exchangerate setting to work. The new system would allow smaller, more frequent changes to be made. “There tas undoubtedly been a loss of export profitability since the exchange rate was last adjusted,” said Mr Muldoon. “An initial adjustment of the rate is therefore desirable upon the in-

troduction of the new regime.” Mr Muldoon said the size of devaluation was smaller than many commentators had suggested was required. “The adjustment, however, is different in character from that which they have been envisaging. “Whereas a devaluation under the conventional rules that applied until tonight would in time have been largely eroded by inflation, the improvement in export profitability that will follow from this devaluation will be fully maintained by the continued-adjustment rule.” Mr Muldoon said that rather than adjust the value of the dollar at in-

frequent intervals the Reserve Bank would make small adjustments, each of less than 0.5 per cent, reflecting the rate of cost increases in New Zealand relative to the increases in the costs and prices of New Zealand’s main trading partners. The present devaluation would have a minimal impact on the consumers price index. Western Samoa last evening devalued its currency by 15 per cent to coincide with the New Zealand Budget. The Minister of Finance (Vaovasamanaia Filipo) said that Samoa had suffered worsening terms of trade since the last devaluation in 1975.