Govt to stay on its economic course

Press, 23 September 1980, Page 6

Govt to stay on its economic course

PA Wellington The Government will redouble its efforts to explain economic policies to the public but it will not retreat from-the economic path on which it has embarked, in spite of its shock defeat by Social Credit in the East Coast Bays by-election, the Acting Prime Minister (Mr Taiboys) told the Wellington Manufacturers’ Association last evening. “The Government will pursue its programme of economic change because it believes it is in the best long-term interests of New Zealand and it will redouble its efforts to explain the programme to the country,” Mr Taiboys said. Noting that the Government had been criticised for failing to get its economic message across, Mr Taiboys said this had not been for want of trying. “Too often, unfortunately, attempts to present reasoned arguments are drowned out by the headlines given to some adverse economic event or the misrepresentation of Government actions.”

Mr Taiboys said the Government’s basic assessment was that successive governments had failed because they had shunned orthodox policies. “Under pressure from different sections of the community, governments have obligingly tried to repeal the laws of supply and demand. “They have intervened to control prices, fixed exchange rates at over-valued levels, artificially raised the price of imports through protection, frozen public sector charges in the. face of rising costs, and controlled interest rates so that savers subsidised borrowers,”' Mr Taiboys said.

i In Budget statements and other policy initiatives of the last two years, the Government had been concentrating on orthodoxy . . “on getting the basics right," Mr Taiboys said. ’ °ln a speech devoted' en- ■ tirely to the Government’s economic policies, Mr lal- ' boys said: “By restraining public expenditure we have brought down the Government’s deficit, though we had to pause this year to support domestic activity. “Firmer monetary conditions are one of the main silocess stories of the last vear and must be maintained in order to moderate inflation. “The new exchange rate system has had a - major; bearing on confidence and increased output in the, export sector. “In the protection area, we have made a start with the difficult task of encouraging industry to move into more productive, export-ori-ented activity.” Mr Taiboys said he thought the Government had made good progress, in some important areas, including encouragement policies for exports, monetary policy, restraining public expenditure, and energy project decisions. But there were two areas in which he believed the Government must do better — prices and wages, and protection policy. Inflation had disappointingly rebounded from the level achieved in 1978 and, if unchecked, would severely damage New Zealand’s hopes for growth, international competitiveness, and employment, Mr Taiboys said. “Barring resort to Draconian restraint policies, the • only way forward I believe .

lis a much better social understanding between the Government, employers, and unions.” This year’s wage talks had not achieved as much as they should have. “The cur- . rent wage round is producing settlement levels which threaten to set back our recovery chances. “I do not want to ascribe I blame?’ Mr Taiboys said. ‘.‘l ; am simply saying that we must redouble our efforts in this area.” On protection policy, Mr Taiboys said that until this year there had been virtually no move since 1972 to adapt New Zealand’s highly distorted and inefficient structure of protection to i present requirements for | industrial development. ■ | “Opposition to change i from manufacturing and union lobbies has tended to create the conditions, for political cowardice,” Mr Talboys said. However, New Zealand manufacturers had become far more confident in the past decade. “Many endorse the proposition ia this year’s Budget that changes in , our import licensing system are now inevitable to strengthen Our ability to compete,” Mr TaR boys said. He emphasised that this did not mean a move to free trade. "But it does mean the development of a lower and less distorted protective structure.” Commenting that he believed industry views and the views of the . Government were not far apart, Mr Taiboys said that constructive dialogue should be pursued more intensely on the industry studies programme and the proposals for a new trading arrangement- -with Australia.