Minister forecasts economic 'slog’

Press, 16 February 1980, Page 7

Minister forecasts economic ' slog’

PA New Plymouth New Zealand’s trustee banks have been urged by the Deputy Minister of Finance (Mr Templeton) to work together to overcome the pressures on the nation’s bank balance. In an address to the Associated Trustee Savings Banks’ annual conference at New Plymouth, Mr Templeton said it would be a continuing slog in the 1980 s to maintain economic activity and employment. “Other resource base is sound; it should see us right into the 1980 s, but there is a difficult gap now for some years. Can we work together as New Zealanders to bridge that gap?

“We know it (the gap) as the balance of payments deficit, but it is a real gap, a gap that means we are living beyond our income,” Mr Templeton said. “The only solution is to work together if we are to overcome the pressures on -the nation’s bank balance; if we are to meet the challenge of rising oil and import prices and absorb them without adding to inflation; if we are to

limit and control our inflation and our urge to live beyond our means.” Mr Templeton said that as the main tax period of March was approached he expected “the growth in monetary aggregates” to continue to fall in the light of a tightening fiscal deficit. “Certainly this year will be tighter than last year,” he said. The two main economic problems were the country’s poor productivity performance and wagepush inflation. Over the years New Zealand had developed a cost-plus system over about two-thirds of the economy, with the other third being caught in a cost-price squeeze. The community must realise that if wage settlements increased faster than our economic growth, restraint on domestic consumption would be much harder to restrain, Mr Templeton warned.

“We need national restraint in the income and wages field if we are to get inflation down to a reasonable level. A redirection of resources to. ward productive growth is vital if our economic objectives are to be real-

ised — that is, in the development of internationally competitive industries.

“Most important is the need to increase efficiency in the use of resources and to shift from an in-ward-looking to an out-ward-looking economy.” Mr Templeton said New Zealand would also have to look closely at the development of its economic relationships with other countries, particularly Australia. New Zealand would have to take today’s opportunities for a larger market; for stronger, more co-ordinated trading co-operation, and for lon g e r-term resource strategies. Trustee bankers could be well satisfied with their performance over the last four years, in the light of strenuous competition for funds, not only from other financial institutions, but also from the Government, Mr Templeton said. “As your familiarity and expertise in the new order of financial markets improves, I am sure that you will continue to grow and prosper for the benefit of the community at large,” he said.