‘Deficit financed at expense of private sector’

Press, 3 May 1984, Page 8

‘Deficit financed at expense of private sector’

The Government was financing the “huge” internal Budget deficit at the expense of the private sector, said the president of the New Zealand Party, Mr Malcolm McDonald, in Christchurch yesterday. Mr McDonald said that the independent report released by the Institute of Economic Research on Monday gave further proof that Government policy was restricting the economy. The report, commissioned by the Finance Houses Association, detailed the consequences of the Government’s recent decisions to raise the amounts that finance houses must hold in Government securities. Mr McDonald said that the report confirmed the

New Zealand Party’s view that the policy decreased the finance available to the private sector and pushed interest rates up, leading to increased inflation. The Government was desperately searching for low interest funds to finance the “huge” internal deficit. The only way it could obtain these funds was by regulation at the expense of the private sector, he said. “If we continue with the present policies, the economy will inevitably become more depressed, unemployment will rise, and more companies will be forced into liquidation,” he said. It was “vital” that the Government started to free up the economy and brought in a realistic exchange rate.