Bank fears threat to inflation moves
The November mini-budget will boost consumer spending but it could put anti-in-flationary policies at risk, the Bank of New South Wales says in its latest quarterly review. ‘The result of the fiscal and monetary measures might be to check the growth in unemployment, but without necessarily producing any real increase in business investment,” the bank says. "Moreover, they could put at risk the exisiting policies designed to combat inflation and restructure the economy toward export-orientated industries, both of which are necessary to enhance New Zealand's competitive position when a recovery in world trade eventuates”. The bank says that the essential long-term factor in the recovery of the New Zealand economy is a real improvement in export prices.
“Only part of the blame for the economic malaise; can be attributed to the sec- ] ond round of oil price in-: creases in 1979”, the bank says. "Deflationary policies pur-' sued by the United States and the United Kingdom would have probably Deen; more detrimental in their effect on New Zealand exporters”. The bank says that the economy probably reached the trough of the current business cycle in the second half of the year. Although the rate of consumer price increases had slowed in the year to September, it was still above ' the annual rate in 1979. “The effects of sharply rising import prices, exacerbated by the downward float of the New Zealand dollar, suggest that inflation will not moderate to any great degree in the coming year,” the bank says. <
Retail sites, which have grown at f real rate of 3.5 per cent, re expected to remain buoyant, but the of the buifling industry continued. i But th* bank sees some improvement next year if the recent sharp drop in migrant outlow is repeated. "In maiked contrast to the depressed domestic sector, exports have enjoyed a boom acpss the board,” the banks sa»s. “Unforunatley this excellent performance was dimmed oy a 30 per cent increase h import payments to $4.7 lillion, as the cost of mineral; fuels more than doubled; the value of manufactured imports rose markedy, and the New Zealand ddlar was depreciated progresively. “Indied the terms of trade are new worse than at any time lince the world economic depression of 1974-75.”
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Press, 29 December 1980, Page 21
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378Bank fears threat to inflation moves Press, 29 December 1980, Page 21
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