Price inflation of 17p.c. tipped

Press, 25 September 1980, Page 4

Price inflation of 17p.c. tipped

PA Wellington An average rate of consumer price inflation of 17 per cent is predicted for 1980-81 by the Institute of Economic Research, in its quarterly predictions for September, 1980. The institute said that an expected wage increase of 19.5 per cent dominated its predictions for the period, which were issued yesterday. The wage increase forecast is based on the 4 per cent Wage Order in the Budget, and the recent settlement of the trend-setting

General drivers’ Award of 13.5 per cent last month. In spite of wages keeping ahead of inflation, the institute said strong fiscal drag, and a decline in real income from other sources, would cause a net decline in real private disposable income and private savings during 1980-81. It was unfortunate, the report said, that alternative policies giving lower pre-tax wage increases, which would be offset by measures to sustain real post-tax earnings, received little consideration from the parties concerned. All big industries were now affected by the international recession, but it would not be more severe or protracted than the 1974-75 recession.

The immediate effects of the recession would be increasing unemployment, decline in public and private investment, decline in gross domestic product, an increase in public consumption (mainly because of expected public sector wage settlements), a fall in import volume, and slower export growth.

Economic recovery was likely from 1981 onwards, the institute said.