‘Devaluation could dent unemployment’

Press, 20 July 1984, Page 3

‘Devaluation could dent unemployment’

PA Wellington The Manufacturers’ Federation believes that the 20 per cent devaluation could make “a substantial dent” in unemployment. The vice-president of the federation, Mr Graeme Alexander, said yesterday that every economic sector must play its part in preserving the benefits of “this once-only creation of job opportunities. “Every extra $1 million worth of exports means 160 extra jobs, and the relative increase in the price of imports will mean new areas where domestic production can substitute for imports,” he said. However, if, the devaluation were only a part substitute for the present export performance incentives, employment benefits would be reduced.

The same would occur if the benefits of devaluation were frittered away in higher costs, he said. Because timber exporters sell in overseas currency, New Zealand’s timber industry will gain maximum benefit from devaluation.

The executive director of the Timber Industry Federation, Mr Wayne Coffey, said yesterday that the industry would firmly resist any attempt by overseas buyers to reduce prices. Sawn-timber exports earn New Zealand about $BO million a year, and the volume of exports is expected to rise 500 per cent in the 19905.

The fishing industry’s export earnings should be boosted about $6O million this year because of the 20 per cent devaluation, according to a Ministry of Agriculture and Fisheries economist, Mr lan Clark. Mr Clark, the chief fisheries economist in the Ministry’s Economics Division, said that before devaluation the total export earnings for the industry this year were expected to be about $360 million.

Devaluation should add another $BO million to $9O million to this figure, said Mr Clark.

However, fuel, machinery, fishing gear, and charter fee costs would increase about $25 million to $3O million. “The individual fisherman

should be able to get higher returns because of increased export receipts, but there will also be higher fuel and other costs,” said Mr Clark. The unknown factor was how devaluation would affect internal prices. “It would appear that‘the fishing industry is well placed to take advantage of the devaluation,” said Mr Clark.

Mr Bruce Coe, chairman of the Overseas Tour Operators Committee, announced yesterday after an emergency meeting of the committee in Auckland that a surcharge based on the 20 per cent devaluation would apply on the land arrangements of all overseas travel.

The surcharge would apply for all arrangements booked and full payment not received by members of the committee by close of business on Thursday, July 12. Payment received after July 12 did not allow sufficient time for tour firms to remit their funds overseas.

Tour firms have agreed to absorb costs on travel paid before that date to reduce the effect on the travelling public.

The junior vice-president of Federated Farmers, Mr Brian Chamberlin, said that some commentators had suggested that the devaluation would increase farmers’ incomes 20 per cent, but the benefit to most farmers would be much less. Although devaluation almost made up the difference between the basic price to dairy fanners this season and the market expectancy before devaluation, without an improvement in market returns, dairy farmers could not expect any advance on the basic 355 c a kilogram. Sheepfarmers should get an increase in wool prices this year, he said. It would, however, not reach 20 per cent unless the market itself improved. The wool price to farmers might increase 10 per cent rather than 20 per cent, he said. The devaluation should take lamb clear of the S.M.P. level, but only just. This would mean that the increase to farmers would be at a level of 2 or 3 per cent rather than 20 per cent. “Beef is better news and, as the price for this commodity is above the S.M.P. level, farmers should be able to expect a 20 per cent lift,” he said. “This will have some benefit to dairy fanners as well, as beef is a product from that industry too.” Even if fanners did get a 20 per cent increase, this was on their gross incomes, not their net returns, said Mr Chamberlin. However, a member of the Dairy Board, Mr Peter Jensen, has said in Tauranga that dairy fanners could expect an increase in the basic price of milk fat. The industry should go close to breaking even after devaluation and the basic price would not need propping if manufacturing costs could be held. “It would be nonsense for the board to sit through a period of depressed prices with $360 million in its reserves account,” he said.