New Zealand economy expected to slow

Press, 14 May 1982, Page 20

New Zealand economy expected to slow

A further slowdown may be expected in the New Zealand economy because of the tight money supply and the decline in business confidence, according to the quarterly survey of business opinions, conducted by the New Zealand Institute of Economic Research. The overview from the survey, conducted by postal questionnaires sent to executives of about 800 organisations. concluded that the severity of the slowdown was likely to depend on the economic measures taken in the next few months to sustain investment, profitability, and underlying business confidence. “Overall, the economy remains in a growth phase,” the institute said. “Compared to three years

ago the situation appears stronger because of the underlying investment and the profitability growth of the economy.” The survey showed that the upsurge in activity and stimulation of business throughout 1981 levelled off soon after the election. Thus recent growth in private sector activity was reported to have peaked in the December quarter. Nevertheless, the growth reported in the March quarter was strong, compared with the last three years, and was expected to continue in the next three months.

“The survey, reports once again that there is little growth in employment — a situation that has prevailed in the last few quarters,’' the institute said. However, this contrasted

with the decline in employment throughout 1980 and earlv 1981.

Growth in profitability had continued, and consistent with this was the emerging pattern of an easing in cost increases with little sign of an easing in selling price increases.

"In addition, expected investment in plant and machinery’ as well as building continue to be in a relatively strong position compared with the last three years." Financially, the economy’s tighter money supply was beginning to constrain business activity, especially in the building and services sector, it said. In addition, the financial institutions expected extensive increases in the interest rates charged on loans.