Little prospect of short-term growth

Press, 27 November 1979, Page 20

Little prospect of short-term growth

The immediate outlook for the New Zealand economy is for a slowing of business activity, with little prospect of growth in the coming year, but a number of decisions have been taken recently which might radically alter the course of development from the mid1980s, according to the sixmonthly Economic Review of the National Bank. The Review recalls that the resurgence of the economy during the year has been accompanied in recent months by a deterioration in both the balance of payments, and the raje of inflation. As a consequence, the monetary ’ and fiscal stance of the Government

r.has shifted to become re-1; s strictive with the intention I i s of reducing the rate of i t (domestic expansion. i ’! “Given the continued high i [levels of unemployment, and I'net migration loss, the di- j - lemma for the Government < f will be to avoid an over-cor- i - rection of policy, A rigid t - stance on monetary policy i i could create a severe credt I squeeze, which is in- ; t appropriate to a time when i -the world economy is mov-i i ing into recession, and; t growth in the New Zealand , i economy is slowing,” the.l - bank says. The Review lists the fund- < , amental strategic decisions!] 1 made recently as primarily!] t the decision to seek at least 1 !

'5O per cent self sufficiency: Ijn liquid fuels, and the dec>-[ sion to investigate a closer economic alliance with Aus-I tralia. “Other smaller, but important, decisions have in-i eluded the adoption of a more flexible exchange rate,| !and a forward exchange cover; a relaxation of control on overseas investment;' a strong commitment to the export sector through special tax incentives; and a general desire to free the economy from excessive jbureaucratic intervention. All of these decisions, once [extended and refined, should [provide an environment for [growth in the 1980 s,” the! National Bank says. i