P.M. predicts low inflation rate

Press, 9 December 1983, Page 3

P.M. predicts low inflation rate

The consumers’ price index would rise from an estimated 4 per cent this year to no more than 5 to 6 per cent next year, said the Prime Minister, Mr Muldoon, in Christchurch yesterday. “In the year of the breakout from the freeze the critics will be confounded,” said Mr Muldoon, before officially opening the Canterbury Savings Bank’s new $12.2 million Canterbury Centre complex. By then New Zealand would have had two years of single-figure inflation, he said.

The inflation expectation was closely related to business decision-making, and in the year of the “break-out” from the freeze it was essential that the business sector have faith in the Government’s ability to keep the inflation rate down, he said.

Mr Muldoon apologised to guests at the official opening for his being slightly late. He said that he had been “saying goodbye to an old friend” — referring to the late Sir Keith Holyoake.

A small number of placard-carrying protesters were waiting outside the Canterbury Centre when Mr Muldoon arrived. They were almost outnumbered by the police, and there were no incidents.

The biggest slogans said, “No youth rates” and “Fight unemployment.” One protester carried a placard asking for a “Compulsory quota for all New Zealand music on mainstream radio and reduce the sales tax on records.” Mr Muldoon said he had

been “a little disappointed” that lending institutions had not done more in their advertising to encourage saving since the Government had brought the inflation rate down.

“High rates of inflation mean a diminished incentive to save; people see it as a time to spend, but today’s lower rates of inflation make a good time to save,” he said. He believed that the reason for the trade union movement’s limited activity on wage rises during the freeze was that the ordinary worker was perfectly happy with the freezes, as long as they restrained prices as well as wages. Mr Muldoon gave warning to “all institutions involved in mobilising finance” that interest rates of all kinds would be reduced next year. “Many fatuous statements have been made regarding the movement of funds for lending. This is being monitored on a day-to-day basis, and interest rates will be adjusted to a level appropriate to the rate of inflation,” he said.

Congratulating the Canterbury Savings Bank on its "fine new building,” Mr Muldoon said that trustee banks were “people’s banks” with great ability to get young people to save their money — although his own example was not a shining one.

“I opened an Auckland Savings Bank account at the age of five. I still have it. In fact, I have probably still got the same deposit, although it may be worth less than it was,” he said.

The Mayor of Christchurch, Sir Hamish Hay, said that the Canterbury Centre, the tallest commercial building in Christchurch, was a fine addition to the city’s central business district.

Congratulating the C.S.B. “on behalf of the people of Christchurch,” he said that more development was needed in the central city to compete with increasing commercial activity in the suburbs. “It is in the interests of all ratepayers to encourage projects such as this one,” said Sir Hamish.

The general manager of the Canterbury Savings Bank, Mr Frank Dickson, said that most people would see the new complex “as a tall commercial building with a distinctive, hexago-nal-shaped tower, topped by an unusual roof design.” “However, those of us involved in the management of the bank see it differently: we see it in terms of interest rates,” he said.

Until a month ago, five of the bank’s head office functions had been in separate buildings.

“Now that we have them all under one roof, where we share common staff facilities and where communication is easier and more direct, we believe that we can be even more efficient,” said Mr Dickson. “Greater efficiency, and therefore lower costs, should lead to higher interest rates offered to depositors and lower interest rates charged to borrowers. That is why we see this ‘building in terms of interest rates,” he said.