Devaluation 'not a panacea,’ says CPD’s chairman

Press, 29 August 1984, Page 36

Devaluation 'not a panacea,’ says CPD’s chairman

PA Wellington Devaluation was at best a short-term palliative and not a panacea for all New Zealand’s economic ills, the chairman of Cable Price Downer, Mr R. W. Steel, told the CPD annual meeting in Wellington yesterday. It was overdue, but it was a drastic action, he said. “It’s a pity it was not done in, say, two smaller bites at intervals, rather than the massive 20 per cent that was finally deemed necessary. I suspect the 20 per cent may be too much and some small revaluation adjustment may be shortly forthcoming.” While pre-devaluation stocks were available, CPD was enjoying an artificial stimulus, particularly in the motor-car market, he said. “I cannot judge the severity of the post-devaluation hangover, but it could be quite painful, in terms of the demand for capital plant,” he said. He outlined the effects of devaluation on Downer and Company, the construction division, as an example to illustrate that devaluation would not automatically create more opportunities and more profits from offshore activities.

Export market development trips and the New Zealand dollar cost of main-

tabling international offices would now be up to 25 per cent higher, he said. International travel and the establishment of such offices were central to the conduct of market research, setting up commercial associations and developing an understanding of local business. New Zealand-sourced inputs for off-shore construction contracts were relatively small, Mr Steel said. "Devaluation will therefore do little to enhance our competitiveness as a construction contractor operating in the Pacific and SouthEast Asian region.” Devaluation would also mean profits earned in foreign currencies would be greater in New Zealand dollar terms — as would be any losses incurred. Referring to the phasing

out of export incentives, he said he disagreed with any suggestion that devaluation was a substitute for incentives. He urged the Government to review the tax system. To create a larger base on which to levy tax, he suggested increasing production investment and employee numbers. CPD’s results for the current year were predicted to be ahead in the first half and down in the second half. “The group is in good heart, trading is currently very buoyant, we have adequate liquidity and I believe the 1984-85 year will be a good one for shareholders,” said Mr Steel. The meeting approved an increase in the authorised share capital, from $60,530,000 to $150,000,000 and a one-for-two bonus issue.