‘Price freeze will not reduce inflation’

Press, 24 September 1982, Page 2

‘Price freeze will not reduce inflation’

PA, Wellington Wage and price freezes had always led to higher inflation and distortions in

the economy and it was difficult to believe New Zea-

land could avoid this, said an American economist. Professor Michael Boskin. of Stanford University, in Wellington.

Professor Boskin is in New Zealand for a week-long visit and was interviewed at the American Embassy.

With a number of “supply side" economists. Professor Boskin has advocated a freeing of the market place and tighter controls on the monetary system in order to control inflation. Some of his ideas were incorporated in the blueprint for President Reagan’s economic programme. which Professor Boskin edited.

Wage-price controls had not worked very well in the United States and history was full of examples where they had not worked in other countries. Professor Boskin said.

After tight controls, the rate of inflation tended to increase at an even greater rate than it had been before, he said. It could also lead to a lowering in the quality of goods and a black market developing.

“At least some of these conditions will occur in New Zealand. I hope you are able to avoid some of the disruption and disturbances we underwent. I am dubious that you will,” he said. Asked to comment on the views expressed recently by the ’Prime Minister, Mr Muldoon, that the world recession could lead to an international disaster. Professor Boskin said that he did not expect the international recession to get worse. However, as the New Zealand economy tended to be behind the rest of the world's, the recession here could still worsen.

“You had substantial growth last year; it would be imprudent to suggest that this would continue."

Mr Muldoon was “quite correct” to draw to world attention the plight of Third World nations in debt, he said. He did not think, however. that increasing the amount of money the World Bank and the International Monetary Fund could use for lending would help the situation.