Policies add to instability’

Press, 20 September 1982, Page 6

Policies add to instability’

PA. Wellington The Government’s economic management—electionyear spending sprees followed up by restraints—accentuated instability, said a leading economist. Mr Len Bayliss, on Saturday.

The next five years would see : no significant lift in production or economic activity as long as present economic policies continued, he told the annual convention of the Launderers, Drycleaners, and Dyers Association at Wairakei. '.

Low domestic sayings rates, high inflation, substantial capital misallocation, an over-valued exchange rate, poor technological development. and disincentives for saving, innovation, or risktaking were reasons he cited for the low growth prediction.

With present policies, it

was inconceivable that the 410.000 extra jobs the Government had specified would be created in this decade, said Mr Bayliss.

"In fact. iOO.OOO extra jobs might well be regarded as an optimistic forecast on recent employment trends." he said.

Mr Bayliss said that in April-September, 1981. the money supply rose at a highly inflationary 20 per cent)annual rate, while in the same quarter in 1982 the figure would probably be about 4 per cent. The net foreign exchange gains from the major projects were, even on optimistic assumptions, comparatively small: for instance $l5O million to $3OO million annually for the synthetic petrol plant.

“In addition, the substantial overseas borrowing. re-

quired to finance the major projects will have to be repaid. When the plants come into operation, substantial capital repayments will take place. . “It is clear that because of capital shortages, the Government is reducing investment in the farming and manufacturing sectors to the detriment of future export growth." said Mr Bayliss. Low economic growth also stemmed from virtually stagnant farm growth, with stock numbers increasing very slowly and real farm investment declining. . Mr Bayliss said that business should plan on the basis of an average gross domestic product growth rate of about 1 per cent per annum for 1983-88, about double the rate achieved during the last six years. . .