Govt policies ‘not in balance’

Press, 2 May 1984, Page 27

Govt policies ‘not in balance’

PA Wellington New Zealand’s economy would continue to perform poorly until the importance of its firms was more widely recognised, economist Mr Brian Easton told the annual conference of the New Zealand Chambers of Commerce in Invercargill yesterday. “In particular, there is an over-emphasis on the role of the central government in the economy, and a belief that firms are merely the instruments of central government,” he said. New Zealand could trace its ideology of government economic management back to the interwar depression, when the hardships suggested that market regulation of the economy was inappropriate. The mid-1960s saw the end of an era and forced traditional exporters and manufacturers to become more efficient in seeking, new markets. The government, already involved in the economy, was drawn into this reform, Mr Easton said. It was forced to reduce protectionism in order to improve quality and keep costs down, and to remove grounds for objection by trading partners, now important as markets. However the trend towards less government involvement had had its problems, Mr Easton said. “It has taken place in a period when the New Zealand

economy is badly out of balance.” “The government has taken a series of measures to deal with the inflation problem, but in order to maintain the wage freeze it gave very large income tax cuts mainly for the top half of the population. “Thus the imbalance has switched from inflation to the financing of a large government deficit while maintaining controls on wages, on prices, and on interest rates.”