Economist made right choice—P.M.

Press, 12 February 1982, Page 2

Economist made right choice—P.M.

Parliamentary reporter

Suggestions that the chief economist of the Bank of New Zealand, Mr Len Bayliss, was forced to resign by the Government were described yesterday by the Prime Minister (Mr Muldoon) as “extravagant.” Mr Muldoon said he had refrained from commenting on the resignation because he was not aware of Mr Bayliss's reason for resigning and had had no advance notice of his intention to do so.

“Extravagant newspaper comment has suggested that he was forced to resign by the Government, and his fellow economists have now taken the extraordinary view that I should not comment on economic forecasts, even though I may disagree with them,” he said.

“The late John Bell Condliffe, New Zealand's greatest economist, once said to me, ‘the art of political economy, which used to be

written by Scotsmen in English. has now become the pseudo-science of economics, which is written by Hungarians in alegbra.' "The wisdom of this statement is contained in the one word, ‘political',’’ Mr Muldoon said.

“Last year, three months before the election, Mr Bayliss advocated a devaluation in conjunction with getting rid of export subsidies to farmers and manufacturers, and replacing import licensing with tariffs. He also predicted an inflation rate this year of 20 per cent. “Apart from the fact that a devaluation w’ould have been a mistake, and that noone, other than the Leader of the Labour Party, has agreed with his exaggerated figure of 20 per cent for inflation, no political party could have accepted ' his proposal and remained in office. At that point his advice is valueless.”

More importantly, many people in New Zealand, and

even more in other countries, saw the Bank of New Zealand as an arm of the State even though it was not. "The views of its economist are thus given, erroneously. an official status,” Mr Muldoon said.

"The advocacy of a devaluation. supported by certain other economists, clearly had an effect on business decisions in respect of the movement of external funds. The directors and management of the Bank of New Zealand deplored the comments and very properly dissociated themselves from them.” Mr Muldoon said.

“If Mr Bayliss has decided that separating himself from the Bank of New Zealand enables him to publicise his views more freely, then I can only say that I think he has made the right decision," he said.

“Naturally, and in spite of the views of his fellow economists, if I should disagree with him in the future I shall sav so.”