‘False recovery’

Press, 3 May 1984, Page 8

‘False recovery’

Parliamentary reporter New Zealand is experiencing a “false recovery”; according to Labour’s finance spokesman, Mr R. 0. Douglas. Mr Douglas said yesterday that imports were rising sharply, yet export incomes were seriously low. The result would be a balance of payments deficit of at least $2200 million by the end of the year and an overseas debt of about $20,000 million by March, 1985.

He told “The Press” that he believed the balance of payments deficit could top $2OOO million by next month.

The sharp rise in imports was mainly a result of restocking by manufacturers to meet a “false boom” in consumer demand, caused by a big growth in the money supply, similar to election years in 1978 and 1981.

Although there was an economic recovery

overseas, New Zealand was not benefiting from it in terms of its export returns, he said. “The stark facts are that New Zealand’s main export industries have serious problems, in particular sheepmeat and dairy industries. Wool prices are also low,” Mr Douglas said.

He accused the Government of “incompetent, imprudent and reckless management of the economy.”

Asked what Labour would do to avoid a similar deficit, he said that the money supply growth would be checked, Government spending restrained, and investment in productive areas encouraged through an appropriate tax structure.

He said that goods were being imported at present simply because there was money around. However, a build-up in this activity this year meant a downturn next year lower than should occur.

Mr Douglas said that overseas reserves stood at an “appallingly low” level of about $l2OO million at present, or about 1% months imports.

“Prudent countries maintain reserves at least equivalent to four months imports,” he said.

“This means New Zealand will have a minimum requirement of three billion dollars over the next year, just to get reserves up to a satisfactory level and to cover the increase in current account deficits. “New Zealand’s overseas debt by March, 1985, will be about $20,000 million, with debt servicing costs being worse than virtually any other country in the world,” Mr Douglas said.

He said New Zealanders were awake to the Prime Minister, Sir Robert Muldoon’s tactics of “boom and bust,” and realised that there would be adverse consequences on unemployment and growth.