Accusations fly in House

Press, 18 August 1984, Page 1

Accusations fly in House

By

MICHAEL HANNAH

in Wellington The Minister of Finance, Mr Douglas, yesterday labelled the Opposition “the guilty men,” responsible for a “huge legacy” of debt, which will require New Zealand to borrow $5 billion in 1989 alone. Mr Douglas made his charge in the Imprest Supply debate in Parliament, and listed the amount New Zealand would have to borrow over the next five years to repay or roll over loans incurred by the National Government. He also delivered a stinging attack on the rise in debt-servicing costs, describing it as a “recipe for bankruptcy.” The debate was occasioned by a bill seeking supply to cover Government spending to about the end of the year. The Imprest Supply (No. 2) Bill sought $5,257,250,000 for the public purse, and was the second Imprest Supply this year. The debate was dominated, however, by contradictory statements about the advice tendered to the

outgoing and incoming Governments last month by the Reserve Bank and the Treasury. Treasury reports furnished to the Labour Government after the election were quoted 1 , while the Opposition cited contradicting Treasury reports it had received before the election. Although Mr Douglas said that he would agree to release the reports the Government quoted from, in response to a formal reSuest by the Leader of the ipposition, Sir Robert Muldoon, the Opposition declined to give “The Press” a copy of the Treasury report it had referred to. Mr Douglas said, however, that when he released * the Treasury reports, the Opposition should “buy all the tissues it could to wipe off the egg it would have on its face.” But an apparent contradiction involving the Minister of Trade and Industry, Mr Caygill, and advice he had received from the Governor of the Reserve Bank, Mr Spencer Russell, highlighted the Opposition’s attack on the Government’s

performance since it assumed office last month. - Mr Caygill had been quoted in a newspaper report as saying the Government had been advised by the Reserve Bank that it faced defaulting on two loans within 48 hours if it had not instructed the outgoing Government to devalue. However, the report also quoted Mr Russell as saying he did not know anything about this advice, and denying that default on any loans was likely in 48 hours. Mr Caygill declined to make any comment to “The Press” on the matter, but in the Parliamentary debate, Government spokesmen argued that the period may not have been 48 hours, but it could have been longer. They also noted that the Reserve Bank had advised that there was no alternative to devaluation. Government debaters chose.to justify the decision to devalue last month, and to attack the Opposition’s record of economic performance while in Govern-

ment. In response, the Opposition accused the Government of creating,, rather than discovering, an economic mess, and- predicted rises in prices, interest rates, and the internal deficit as a result of devaluation. The debate was notable also for the absence of the former Minister of Finance, Sir Robert Muldoon, who had a speaking engagement in Auckland at 1 p.m. The likely contenders for the National Party leadership were therefore left to hold the fort and Messrs J. K. McLay, W. F. Birch, and J. B. Bolger took to their task vigorously — a little too much so in Mr McLay’s case, as his voice cracked during his speech, just as it had done during the first

Imprest Supply ’ debate in June. One contender also failed to take part in the debate: Mr George Gair, leaving his caucus colleagues to judge his performance another Mr Douglas laid into the Opposition at the end of the debate. His figures charted a rise in debt servicing costs and loans coming up for repayment, which he said showed precisely what the Opposition had done to the economy. Figures he supplied in Parliament showed about $2.5 billion would have to be borrowed to cover loans maturing in. this financial year. About $3.2 billion would be needed in 1986; $2 billion in 1987; $3.5 billion in 1988; and $5 billion in 1989. Detailed figures Mr Douglas gave to “The Press” showed the debt figures to

be a little lower, but Mr Douglas said he had included $1,012,589 in Kiwi Savings Stock, which could be repaid at any time with just seven days’ notice. The figures also showed the debt dropping away heavily in 1990 to less than $1 billion, and contained a note that the figures pointed to a reliance on short-term debt. Debt-servicing costs had risen from 6c in every dollar the Government St in 1975/76, to 16.5 c a ir today, and Mr Douglas predicted they would have risen to 20c a dollar in 1986/87. He maintained that debt servicing would cost 25c a dollar if the Opposition’s policies were followed. Coupled with social service costs, the biggest of which were unemployment benefits and national super-

annuation, these costs mounted to 29c a dollar in 1975/76, 44c a dollar at present, and an estimated 50c a dollar in 1986/87. Mr Douglas argued that this reduced the amount of Government money available for health, education, employment, and industry development. Not one company could survive on such a ratio of spending. It was a recipe for bankruptcy, he maintained. He promised that Labour would reduce the internal deficit and so cut the cost of servicing debts incurred by the deficit. The debate was opened earlier by the Deputy Leader of the Opposition, Mr McLay, with an attack on alleged inconsistencies in the' Government’s promises before the election and its actions after it assumed office.

Mr McLay listed “broken promises” on support of A.N.Z.U.S, which he contrasted with a ban on 42 per cent of American warships, which were nuclearpowered. The Government had backed off from opposing the introduction of leadfree petrol, from changes to the National Superannuation scheme, from cuts in sales taxes, and from promises to improve “permanently and substantially” living standards. Instead, there was increased inflation, dearer petrol, and rises in mortgage interest rates which meant that some couples could not afford to buy a house. The economic crisis had -been one of their own making, Mr McLay contested, as pre-election statements by Mr Douglas had indicated .he favoured devaluation. He

challenged Mr Douglas to deny that he had discussed devaluation with businessmen only five days before the election. An Associate Minister of Finance, Mr Prebble, took up the Government’s case, quoting from Treasury reports furnished to the Government after the election. They showed, he said, that New Zealand had displayed one of the “most lack-lus-tre” performances of O.E.C.D. nations, with a growth in gross domestic product of less than half the O.E.C.D. average; a rise in unemployment more rapid than any other O.E.C.D. country, a “dramatic” increase in external borrowing, which failed to stem the poor performance; a higher inflation rate than its trading partners; and investment in projects which did not show “an adequate return.” He contended that under the previous Government’s policies employment would have dropped 0.5 per cent, unemployment would have

risen from 5 to 6 per cent, and inflation would have reached 7.5 per cent in 1985/86, with a deficit of 7.2 per cent of G.D.P. this year. The Opposition spokesman on energy, Mr Birch, said he considered that wage earners would need at least $lO a week in their pay packets to compensate for the recent petrol price rise, and be predicted inflation would push up the cost of natural gas and liquefied petroleum gas and compressed natural gas along with it. However, the Minister of Trade and, Industry, Mr Caygill, replied that the National Government’s decision to expand the Marsden Point refinery was responsible for pushing up the price of petrol and would continue to do so for the next decade. Mr Caygill attacked the National Government’s embargo of Australian investment in New Zealand, saying that applications now under consideration meant another 1000 extra jobs /would be created.