‘Restraint all round’—ANZ

Press, 29 June 1983, Page 20

‘Restraint all round’—ANZ

PA Melbourne Restraint in Government spending and moderation of wage demands would be the key factors in the recovery of the Australian economy next year, the ANZ Banking Group said in its June “Business Indicators” bulletin. The bank argued that incomes and public sector expenditure restraint would help lead to lower inflation and interest rates, which would fuel the pick-up in economic activity. “Over all, continued moderation in wage growth is probably the most important element in ensuring the success or otherwise of current Government policies,” the bank said. “Moderate growth in money wages should enable slower growth in Government spending, increase the boost to economic activity from the Budget deficit and help maintain export competitiveness.”

The ANZ said that domestic capital markets would probably not be under pressure next financial year because of low demand from the private sector. However, the bank suggests that growing private demand could clash with Government borrowing programmes in 1984/85. The bank said that a resurgence in economic activity would increase Government revenues but there would probably remain a significant shortfall against total outlays. The bank said it was vital that the Federal Government plan for a lower Budget deficit, relative to GDP, in 1984/85. The ANZ identified several areas of emerging recovery in the Australian economy. The bank said the housing and construction industry would pick up this year, and the expected growth in world trade in the coming financial year should help stimulate Australia’s export earnings. The ANZ said that the rural sector would make a major contribution to recovery if normal seasonal conditions prevail in 1983/84. A doubling of wheat production to 16.4 million tonnes, and a rise in the gross value of wheat production to sAust29oo million from $1296 million this financial year would provide the basis for the boost from the bush. The bank also estimated that growth in real private final consumption expenditure could ease by 1.5 per cent in 1982/83, but rise 2.5 per cent in the coming 12 months.