Also a social problem

Press, 4 June 1982, Page 16

Also a social problem

As inflation worsens it becomes a social problem rather than an economic problem, Mr John Bayley, farmer and economist, told the North Canterbury Federated Farmers annual conference last week.

The expectation of further price increases tends to become the norm and endorsed into the economic system, he said.

The work ethic begins to fade as necessary wage increases are granted with scant regard to levels of productivity. The adverse effects of permanent unemployment tend to become intrinsic in society. As a nation we have conveniently allowed inflation control to drift from our priorities and I suggest that if progress is to be made we require a programme of social pre-conditioning as to the absolute necessity for the reduction of inflation. Ideas of restraint and the principles of efficiency and productivity should be formost within the community and these, in the first instance, must emanate from the Government, which they are certainly not at present.

The Government is rather tending to index inflation into the economy, and recent examples would be increases in rpad user charges, Post Office charges, and motor registration which have been indexed by the Ministers of

their departments with very little concepts of efficiency.

And we had the Minister of Energy and Resources announcing an increase in oil prices and giving as an excuse the fact that they were the result of devaluation. 4 But he doesn’t go the extra step and tell us that we are only devaluing because we are inflating that much faster than our trading partners.

Inflation-proof bonds are a very classical example of indexing inflation into the economy and on the farming scene S.M.P.S also come into the same category.

Under inflation, with tax rising and therefore the capacity for Government expenditure rising, the Government tends to passively endorse the situation we are in. I think farmers could be forgiven for thinking that the Government has flagged inflation away and are quite happy to sit back and passively take advantage of it, and if the Government isnot outwardly convinced of the necessity to control inflation then we cannot rationally expect the private sector to be.

The Agrow campaign was essentially one of public awareness of the effect on inflation on N.Z.’s agricultural sector and its longterm ability to compete for resources and sustain the growth necessary for in-

creased export earnings for this nation. I see it as an indictment on this nation and the Government that we need to be publicly reminded of the fundamental necessity of agriculture to this country, but unfortunately that is the case.

And it is also the case with inflation. We must keep the necessity to control inflation constantly in front of the population. We must promote a public comprehension of the need to. make less demand on Government expenditure, and that means we will have

to assimilate the inevitable restraint that will go with a cut in Government expenditure.

Such anti-inflationary aims cannot be achieved by Government alone.

Agrow highlighted the necessity of agriculture to the New Zealand economy in the foreseeabe future and the consequent need to sustain investment in agriculture in spite of growth in other sectors.

In the past the principal source of those invested funds has been re-investqd profits but. under inflation those profits are sadly diminished or they are just not there. •

As a sector we acknowledge that S.M.P.s are certainly not the answer to the restoration of profits, though they are a necessary evil in the short term. As a farm sector we have acceded income stablisation to remove some of the undesirable surges of the economy, we have increased capital stock numbers in response to the Government’s request and we have increased production as a means of sustaining cost increases, and I think, given a favourable economic climate, we could do so again. But under inflationary pressures we are certainly reaching a saturation point for production increases.

Therefore is it unreasonable for us to expect the Government to make a more positive effort to reduce inflation, thus leaving a reasonable profit for investment to be sustained? ' ■

I certainly concede that it is not the only means for restoring farm profit, but I am certainly convinced that jt is the most nationally desirable because of the concommitant advantages to the rest of,the nation. Inflation is not New Zealand’s only, problem, but there certainly are not too many others which aren’t closely associated with it,” he concluded.