Reduced inflation rate ‘main accomplishment’

Press, 8 December 1982, Page 26

Reduced inflation rate ‘main accomplishment’

A predicted 1982 inflation rate of 6 per cent was one of the main accomplishments of the Reagan Administration, the American Ambassador to New Zealand, Mr Monroe Browne, has said. It was a unique .accomplishment, Mr Browne told the Economic Society of New Zealand (Canterbury) and the Institute of Internal Affairs, in Christchurch. Mr Browne said that when President Reagan took office there were interest rates of 21.5 and 22 per cent, but now these were “10 and soft.” “Some will not call them accomplishments, some will say they were made at the sacrifice of the economy. “That we may have inflation at 5.5 per cent is beyond any of our expectations. We had hoped to get it to nine or 10, and hold it at that,” he said. Mr Browne outlined the four basic techniques of the Administration in approaching the United States’ key problems. Tax cuts of five and 10 per

cent had been made in the President’s first two years in office, and another of 10 per cent had been brought forward. A drastic cut in Government spending from the figures proposed by the Carter Administration was combined with an increase in defence and military expenditure. Government deregulation was another of the new Administration’s moves, he said. The final technique was the return to individual states of the bulk of the functions, services, and duties they once had but which went to Washington.' Mr Browne said the Administration had hoped that the unemployment rate of 7.5 per cent would have held through the transition period, “but it hasn’t.” “We have moved up to 10.3,” he said,. and some thought it might rise .to 11 per cent. “Unemployment figures normally follow an economic turn or trend by at least six

to nine months. Obviously until we have a more emphatic turn in our economy unemployment figures will continue to move against us and this is a major problem," he said. But there were more people now in work in the United States, in the middle of a recession, than ever before. Stock market signs were encouraging, he said. Minor signs of improvement were the lowering of interest rates, an improvement in the housing market, and a small increase in vehicle sales. Mr Browne said that Mr Reagan believed that the Soviets had taken advantage of detente, moving markedly towards an increase and development of military defence planning, not just for defence purposes. “The bulk of the spending and planning of the Soviets is of an offensive nature,” Mr Browne said. The United States and the rest of the world had been outpaced, he said.