N.Z. seen to be at ‘economic crossroads’

Press, 26 July 1983, Page 28

N.Z. seen to be at ‘economic crossroads’

NZPA staff correspondent Sydney New Zealand, is at the economic crossroads with this month’s Budget the key to the country’s and its Prime Minister’s future, says the “Australian Financial Review.” In the first of three articles reviewing New Zealand and its prospects, the authoritative daily newspaper described the country as “the land of the long white freeze.” It said Mr Muldoon could either build on the success of the wage-prize freeze and cast his Government in the role of the responsible economic manager, or he could “revert to past economic habits” and opt for short-term vote-catching expansion.

Because of what it described as a surprisingly successful freeze and noting it was backed by “unexpectedly firm monetary control,” the report said inflation had nosedived, while sagging world oil prices and brightening prospects for

exports had allowed New Zealand to start digging itself out of the recession. “But whether it does depends crucially on the decisions being taken over the next few weeks by New Zealand’s combative Prime Minister, the bluntly outspoken Robert Muldoon,” it said.

Noting that the country’s economic management had fluctuated with the election, cycle, with “reckless” expansion before an election followed by harsh corrective measures, the newspaper said New Zealand was left with high infiation and recurring devaluation.

The “Financial Review” said the Budget under preparation would see New Zealand through next year’s election, and Mr Muldoon had in the past shown “a practised awareness of the exact timing of Budget effects for maximum electoral benefits.”

It said the Budget was a key to the nation’s economic future, and a main factor in it would be unemployment

which, until the recent downturn across the Tasman, had been effectively exported to Australia. The report said Mr Muldoon had attacked a recent O.E.C.D. survey which had criticised his stop-go management, and he had said any improvement in the external account should be used to get unemployment down rather than cut overseas debt. “The remark underlines the extent to which Mr Muldoon’s populist instincts can lead him to take over ground more commonly associated with the Labour side of politics,” it said.

“In the interplay of New Zealand politics, the options facing Mr Muldoon have been more sharply etched by the relatively responsible approach the New Zealand Labour Party has elected to follow.”

Labour had rejected the “kneejerk populism” of calling for huge Government spending, and chosen to attack Mr Muldoon from the angle of pragmatic managerial responsibility. The paper said the pivotal role in this was played by the Shadow Minister of Finance, Mr R. 0. Douglas, who it described as an astute man with an impressive grasp of the fundamen-. tals of the New Zealand economy. The article noted that the Leader of the Opposition, Mr Lange, was “cheerfully innocent” of any great economic expertise, having been chosen “partly for his ability to complete his sentences without leaving his audience fidgeting.” ’ “Faced with this challenge from ? the' side of economic rationalism, Mr Muldoon has a unique opportunity to choose between the two alternatives,” it said.

“First, he.can build on the successes of the wages-price

freeze to attempt to outbid Labour as a responsible economic manager, keeping the economy under firm rein and holding off from the election as long as possible. • -

“On the other hand Mr Muldoon may be tempted to revert to past economic habits and set in train a short-term expansion designed to produce the illusion of economic wellbeing by the end of 1984, but at the expense of further structural damage to the New Zealand economy and the running up of even more daunting overseas debts.”