Devaluation for N.Z. not necessary, says U.S. economist

Press, 3 October 1979, Page 3

Devaluation for N.Z. not necessary, says U.S. economist

A visiting American economist has heard rumours that New Zealand is going to devalue its currency be-j tween 4 and 7 per cent this year, but he does not think it is a good idea. This information came out]

during question time after an address by Professor George Viksnins to the IniStitute of Economic Affairs in Christchurch yesterday. His subject was United iStates-Japanese trade relations with particular emphasis on exchange rates. Professor Viksnins said that he did not think another devaluation move this year was necessary for New Zealand.

"You have already had one this year of 5 per cent,” ihe said. "It seems to me ■that New Zealand is enjoying very good prices for agricultural products and that 1979 will probably turn out to be a good year without a further decrease in the .exchange rate.” Professor Viksnins said that New Zealand was one [of the few countries which had a favourable trade balance with Japan, but ' the Japanese should be made more aware of the range of New Zealand products. Dairy products were one “obvious area” where Japanese tastes

were changing. It would also be a good idea to invite Asian economists to seminars in New Zealand to educate businessmen and agriculturists about the market situation in Asian countries, he said.

A good example of market research was the success of

the McDonald hamburgers in, Japan. The hamburger chain, had been very successful in, Japan because it was com-: jpletely new to the Japanese, iway of life and not com-, ipeting with anything similar,! [Professor Viksnins said. The Japanese inflation rate this year was nearing [double figures, and increased 'raw material costs, and not [only for oil. was eroding their surplus. The United States was entering a recession which should reduce [the demand for Japanese im- | ports, and the cost of Japanese labour was going up. A - [Japanese worker used to cost one-tenth of an American worker, Professor Vik-1 l.snins said, but now the cost, [was nearer to half and going, [up. 1 I So were the expectationsb

of the Japanese people. The “relatively recent" flow of. Japanese tourists overseas; had made them aware of liv-l ing standards outside their! own country, including the* fact that their meat prices! were five to 10 times as’ high as prices in the United; States. When Japanese tourists: went home,, they tended to, take packages of cooled) meat with them instead of 1 whisky and cigarettes, Pro-; [ fessor Viksnins said. This! would put pressure on the [Japanese Government for [better housing and food. ’ Professor Viksnins said [that he thought the American dollar had gone about as low as it was likely to go in; |the next 12 to 15 months. j “There has been a great [deal of political uncertainty] [which clouds the position of! [the United States dollar. . J I this would also explain the* [rise in gold prices,” he said. I I The fact that the United! (States was entering a reces-, I sion should slow down the exchange rate, he said, and as political uncertainty became less, and a new President began, to show up in the opinion polls. “We will see a fairly strong recovery of the American dollar." Professor Viksnins also! thought that next year the! United States inflation! would probably fall “consid-i erably.” partly' because of al ideliberate policy. I “The new had of the Fed-; era! * Reserve, Paul Volcker, lis determined to bring this! about and will probably succeed.” he said.