Economy over-committed — M.P.

Press, 6 September 1983, Page 6

Economy over-committed — M.P.

PA Welington New Zealand’s economy is no longer capable of meeting present social welfare commitments, said a Government backbencher, Mr D. F. Quigley, yesterday. Mr Quigley, in an address to the Glenfield electorate, said New Zealand’s economic difficulties were, in essence, the result of poltical over-commitments. He called for New Zealand to return to a more competitive economy, and warned against being “sidetracked by too much shortterm political posturing.” For decades we have made commitments to full employment, to industrial protection, to welfare and to other expenditures which our economy is now not capable of meeting,” he said.

“The crunch came just over 12 months ago and the Government imposed a wage-price freeze to reduce

people’s inflationary expectations and to provide time for policies to be brought together to lead to longterm price stability.” But Mr Quigley said the fact that the inflation rate had come down was both good and bad news. The good news was that it gave the Government an opportunity to cement in the gains made if the Government was prepared to take the remaining tough decisions which were a necessary part of a sustained recovery. . The bad news was that some people regarded the war as already won and urged the abandonment of the remaining painful parts of the cure. There were four main reasons in favour of a return to a free-market economy: the old system was no longer appropriate for modern day requirements; present high levels of protection and control lead to

inefficient investment decisions; a more competitive economy would oblige the Government to devote more time to the longer term; and it would strengthen our democratic institutions.

“The problem with the New Zealand economy is that it is subject to so many licences, controls, outdated procedures and vested interests that the implementation of change is invariably opposed by those who currently enjoy the privilege of that protection.” Mr Quigley said that when incomes, prices, subsidies and protection assumed the significance they enjoyed in New Zealand “it is much more important to maintain the good will of the bureaucrat or the Government than it is to worry about the vagaries of the market place.

“The direct effect which our current levels of control have on democracy is a consequence of the nature of

New Zealand society. We have a single chamber Parliament, a tight twoparty political system, an unwritten constitution, and the capacity for the executive to legislate quickly and effectively in the field of economic policy without prior reference to Parliament. “We also have a threeyear Parliamentary term which should act as an effective check on the potential to abuse the system.

“But unfortunately it doesn’t work that way under present circumstances. This is because of the current degree of private sector business dependence on central Government, the natural bias of the bureaucracy towards the preservation of the status quo in the interests of career prospects, and the reluctance of politicians to face up to the adverse political consequences of changes which

are likely to lead to longterm social and economic benefits but short-term adjustment problems.” Mr Quigley said there had been freezes and interest rate and monetary controls before. But, he said, those measures had had more effect on the quantity of goods consumed than on prices, so recession set in. The Government panicked and the policy was reversed before it could have a lasting benefit.

“To avoid that same result at the end of this current period of restraint, we need an adequate appreciation of the needs of the longer term,' Government debt, rules and regulations and structural adjustment, to name but a few.

“These are all ingredients of a necessary move towards a more open economy, provided we don’t allow ourselves to be sidetracked by too much shortterm political posturing.”