P.M. predicts milk price rise, but low inflation

Press, 28 January 1984, Page 6

P.M. predicts milk price rise, but low inflation

By

MICHAEL HANNAH

Parliamentary reporter Milk prices could be expected to rise after the price freeze ended, said the Prime Minister, Sir Robert Muldoon, yesterday. Milk was an example of “one or two things” which would rise in price because they were based on a formula which had not operated during the freeze, Sir Robert said. However, he predicted such increases would not alter prices “a great deal” in the first half of the year. Prices might rise a little under 1 per cent in the first quarter, and the same in the second quarter, plus any specific movements after the freeze. “What I am really saying is that for the first half of this year, in the absence of a wage movement, the rate of inflation will be much the same as it was during last year, plus any specific price movements that come at the end of the freeze,” he told “The Press.” Sir Robert denied that there would be a significant lag between price movements and wage rises, if a wage round did not begin until later in the year. A wage round would not start until there was agreement on a long-term wagefixing system, he said, but he thought the Federation of Labour would not give its approval to a new longterm system until its conference had considered the

matter. “If that is so, we won’t move into the new wage round until after that conference,” he said. The Long-Term Reform Committee, consisting of F.0.L., Government, and employer representatives, resumed its meetings yesterday, but Sir Robert said he had not received a report on its progress. Asked about the general economic outlook for this year, Sir Robert predicted a “tight” economy with limited” improvement. He said there was evidence of increased economic activity generally, and a feeling of increased optimism. “Now, I wouldn’t want to put a damper on that, but my own belief is that, although 1984 will be up on 1983, that improvement will be limited. “Unless something happens internationally, which I cannot see, it will be a better year than 1983 for most business enterprises, but not a great deal better,” he said. Sir Robert believed that there was evidence of “quite wide-spread” increases in manufacturing production, and some evidence that this might be going into stocks in anticipation of a recovery. However, it was a little early to get good statistics, he said, because of the abnormal nature of December and January. He foresaw a mixed out-

look for farm products. Wool prices were “clearly up,” although meat was a little uncertain. However, the sale of 40,000 extra tonnes of lamb to Iran had helped “tremendously” and must have some effect in stabilising prices, he said. 1984 would be “not too bad” for farmers, Sir Robert predicted. He discounted any change in New Zealand’s exchange rate at present, in spite of the Australian Government’s decision last December to float the Australian dollar. “The exchange rate for the New Zealand dollar is not under consideration. I mean, we obviously keep it in mind, but it is not under specific consideration at the present time,” he said. Any shortfall in financing the Government’s deficit, which he predicted would be less than $3.2 billion at March 31, would not mean a crisis existed, he said. What was important was how significant the shortfall was and whether it would last. “If you had, over a long period, a considerable discrepancy you would be creating a situation of pressure. But if, on March 31, you are perhaps $2OO million short, that means nothing,” he said. Sir Robert said it was nonsense to suggest that the Government had to balance its books to the last dollar on a particular date.