Economists predict ‘flat’ year ahead

Press, 3 October 1979, Page 1

Economists predict ‘flat’ year ahead

By ADRIAN BROKKLNG, commercial editor At best the New Zealand economy will be flat in the next 12 months, and it is more likely to decline, says the New Zealand Institute of Economic Research in its latest report. In Its “Quarterly Predictions” (for the last three months of the present calendar year), the institute says that the recent economic recovery is already faltering, that business confidence is low, and demand “shaky.” The institute’s forecast of consumption growth in real terms is about a half of 1 per cent. “Retail turnover is showing clear signs of levelling off,” it says. “After the restrictions on petrol use, and price increases, and perhaps also because of weakening incomes. petrol

sales are now showing signs of a strong downward movement” After a reasonably buoyant period, new motor-vehicle registrations, are beginning to decline. The indices and leading economic indicators imply a period of slower growth of the New Zealand economy.

The institute expects a large rate of increase in domestic prices in the coming year, which, it says, may have some bearing on wage negotiations. But it says that, in spite of high inflation and an increased balance-of-payments deficit, this problem is not likely to escalate —• because of weakening consumer demand. Farmers’ incomes should be maintained at reasonable levels, the report says. Prices for agricul-

tural production are expected to rise 20 per cent, although the volume of production is forecast to fall 2.5 per cent — mainly because of a lower level of meat production. This in turn is the result of farmers’ attempts to rebuild herds.

Wool prices will remain steady until the end of the year, when the slowing of the American economy may lead to an easing of world demand and thus lower prices. The institute says that the next three months will “almost certainly mark the beginning of a worldwide recession. The United States economy is already declining, and the magnitude of the recession may be determined by the extent to which the West German and Japanese economies will be able to ameliorate this recession.”