Rosier future seen for N.Z.’s economy

Press, 31 March 1981, Page 16

Rosier future seen for N.Z.’s economy

By

OLIVER RIDDELL

in Wellington.

Three things are needed urgently in New Zealand — more jobs, more exports or importsubstitutes, and less dependence on imported energy. This is according to the chairman of the Planning Council (Sir Frank Holmes). He told a recent agricultural seminar in Wellington that New Zealand has great opportunities in the 1980 s to break out of the stagnation which has recently beset us.

This break is vital, because stagnation has led to rising unemployment and a serious loss of able people from the country. It has been associated with more social and industrial tension than most New Zealanders want to see. The Government has been paying greater attention to keeping export industries profitable and. with the help of good weather for farmers for a couple of years. Sir Frank believes these policies are beginning to pay off. The Institute of Economic Research estimates that the volume of exports grew by four per cent in 1979-80 and five per cent in 1980-81, with the growth of farm output the basic source of the growth. Domestic output is beginning to expand in response to this improvement on the export front. The institute sees real GDP growing by 2.5 per cent in 1981-82 and continuing to improve in 1982-83, with a recovery in international economic activity.

This’ better outlook assumes that New- Zealand has learned some lessons from the past: that epxorting will be kept

profitable and political parties will not seek to improve their General Election prospects by making promises which tend to aggravate inflation.. The Government’s supplementary minimum price scheme and other help is designed to reduce the erosion by inflation. Sir Frank considers this is not enough on its own. Inflation remains too high and needs to be contained by firmer policies jointly conceived by the Government,

unions and employers. These partners should also pay more attention to improving productivity in all sectors of the economy, to reforming the taxation system, and improving margins and other conditions which will attract and retain the skilled and responsible people needed for development, thus creating better conditions for the savings and investment needed to provide for sustained expansion through the 1980 s. On the basis of a fresh assessment of likely tiade developments, the Planning Council considers that even in a more slowly-growing world. New Zealand should have the resources and market opportunities to enable GDP growth of at least two per cent per annum on average in the early 1980 s, on a rising trend, and four per cent per annum on average in the latter 1980 s. Given the balance of payments pressures still bearing on New Zealand and the conservative assumptions the Planning Council feels it prudent to make about future terms of trade, this scenario represents moderately good

progress even in the earlier years. GDP growth of two per cent would provide new jobs, although registered unemployment would still be too high; "it would allow investment to increase and total public and private consumption to grow at one to two per cent. Because the total population is likely to be growing at less than one per cent, consumption per head could still rise appreciably. Sir Frank gave an outline of the opportunities for growth the Planning Council saw for the different agricultural sectors:— Pastoral production.—With higher growth rates, exports of meat, wool and dairy products could increase at an average annual rate of 3.8 per cent, providing an extra SI3OOM of export earnings in 1990. Horticulture (including fruit, vegetables, honey and seeds).—This could increase its export earnings from SIS7M in 1980 to ?700M in 1990. The theoretic production potential is enormous. Fishing—lf New Zealand - based boats were able to bring in all the present catch, instead of sharing it with traditional foreign fishers, export earnings from fish could rise from SIOOM now to $267M later in the decade. Manufacturers.—By the mid1980s, manufacturers could be exporting nearly 16 per cent of their total output: export earnings could rise at an average annual rate of

13.6 per cent to about SI6OOM. Forestry.—As newer plantings reach harvesting age early in the 19905. total wood supply will begin to rise very rapidly. By 2000 the volume of ’ wood available for export will be nearly- five times what it is now —22.5 M cubic metres compared with 4.5 M now. This production comes from land already planted in forests. and New Zealand could if it wished double the area devoted to exotics. Tourism.—There is ample scope for growth; in 1978, the Tourism Advisory Council estimated that doubling the number of overseas visitors was a feasible goal. With its programme of larger-scale projects, the Government is encouraging massive growth in the "energy sector to offset rising prices for oil. Eight projects listed by the Treasury as known to be in the pipeline, and involving Government participation, comprise a capital investment of 54300 M over the next 10 years. By 1990, these projects could be contributing about ?540M a year to the balance of payments by import substitution of "exports, and could be providing direct employment for more than 7000 people, while generating many more jobs indirectly. "Clearly we are not trapped in a no-growth impasse by lack .of opportunities,” savs Sir Frank Holmes.

"Our economic problems are problems of management. Given our past record, we are not likely’ to take up all these opportunities. In fact it is doubtful if we could, even theoretically, achieve all

these, growth expectations within the over-all limits of the economy. Questions arise, therefore, about- preferences between • sectors; where should we give the most encouragement?”