‘lnflation fact of life’

Press, 2 May 1981, Page 20

‘lnflation fact of life’

PA Wellington Practical businessmen will have to learn to live with inflation, a top American banker. Mr Fred Whittemore, said in an address to the pacific Basin Economic Council. The top 500 companies in the United States had evolved long-term strategies to cope with continuing inflation in the eight to 10 per cent bracket, he said. “Its painful, but practical.” Mr Whittemore, the senior managing director of Morgan Stanley and Company Inc., New York, said inflation in the United States was falling, but was still disappointingly high. Modern businessmen could forget inflation in the three or five per cent bracket. Monetary policy was not the only tool to cure inflation, be said. Tax changes should be made to motivate people, help capital investment, and get money flowing. Cuts in income tax would assist investment participation in equity and debt fin-

ancing sides of corporate development. Scarce resources must be mobilised and regulations which had outlived their usefulness, changed, he said.

More innovation was required. Finance would not be a fundamental constraint in building New Zealand's energy and other projects, he said. The international banking system would help local banks find the necessary money. Ongoing finance was needed to help develop the projects and make them work. New Zealand needed to export to survive and there must be certainty that the projects were viable and the commodities they produce able to be marketed in a competitive world, he said. It was important that equity finance was raised domestically. Equity management needed to be reorganised to ensure a reasonable rate of return. “I don't believe governments can build things as quickly as private enterprise, although I note that your Government does think so.” But he said he had sympathy where the Government adopted the role of an equity partner in projects to get them built.