THE PRESS THURSDAY, AUGUST 30, 1984. Towards a painful Budget

Press, 30 August 1984, Page 20

THE PRESS THURSDAY, AUGUST 30, 1984. Towards a painful Budget

The Government today takes the first big step in its programme to change New Zealand’s economic performance. Information about the state of the economy, culled from official sources, will be put before the public. The information offered from what is being called “opening the books” is intended as evidence to justify changes — many of them likely to be painful and expensive — that the Government wants to make.

Once these economic justifications are on show, the Government will proceed to step two, the Economic Summit Conference intended to reconcile conflicting interest groups and to persuade them that uncomfortable measures cannot be avoided. At the summit the Government is likely to be looking for assent to policies it puts forward, rather than for demands from sectional interests, or even for ideas about what those interests think should be done.

With justification, persuasion, and consent behind it, the final stage will come in the Budget late this year. There the law will be changed and the community will learn the worst about what it must face — be it increased taxation, new taxes, reduced State spending, further restraints on incomes, or whatever. The new administration is acting with as much speed as can be consistent with thoughtful appraisal of the problems. Even so, the country is having to live for several months in an unhappy period of uncertainty. If the hints and leaks of the last few weeks are taken as evidence, this Labour Government may well end up introducing policies that its predecessor would have liked to use, but did not dare to because of the likely public outcry. The National Government tried hard to bring inflation under control, to limit the adverse effects of New Zealand’s international trade, and to keep unemployment as low as possible. Small cuts were attempted in State spending; restraints were applied to incomes, prices, and interest rates; welfare benefits and social services were maintained; new sources of taxation were sought. Even then, much borrowing was needed from abroad and within New Zealand. The discomfort still proved too much for the electorate.

The new Government enjoys a great strength when compared with its predecessor. The National' Government, and its leader especially, can be blamed, rightly or wrongly, for the country’s economic plight. The assertions that “we” are fixing up “their” mess is as old as party politics. The irony will not be lost on former National Ministers if a Labour Government succeeds in introducing policies that they would dearly like to have used. Some of the policies are likely to be those that the Treasury has been urging for years on successive Governments. They add up to the sensible advice that New Zealand must come closer to living within its means, and that almost everyone will have to make do with a little less.

New Zealand’s decade of troubles really began with the first substantial increase in the price of oil in 1973. The Government of the day

— a Labour administration — tried to cushion the shock and began the significant increase in the country’s debts at home and abroad. The electorate was not satisfied and Labour lost the next election in 1975. In more than eight years the National Government did little more than follow a policy of “damage control” although, for a time, its incomes and prices polices held the promise of longer-term improvement. In the end, politics in a democracy is still the art of .doing what is possible. This means doing what the electors will accept, rather than what dispassionate advisers, be they economists or others, inside and outside the Public Service, might advocate as the best solution. Given the mood of the country, more is possible for the new Government than for the old. It has still to make decisions and introduce policies that will be highly unattractive to some in the community. Already, its increase in the price of petrol, its end to controls on interest rates, and the signs of inflation increasing again are disturbing some of its supporters. Skilfully handled, today’s exercise of “opening the books” can turn some of that discontent on other targets. Many in the community will have difficulty in assessing the economic information that is offered to them. The public will not easily assess whether fair interpretations are being put on it. The Government needs to be plausible if it is to hope for something like general agreement at the economic summit meeting next month. Already, differences are being expressed about the content of background papers for the summit. Interest groups have indicated that they expect their points of view — sometimes conflicting — to receive special attention. Any reconciliation achieved is likely to be more of surface than substance.

The content of Budgets is usually one of the State’s best kept secrets. This year, the Government can hardly avoid giving a succession of broad clues about its intentions. The first will emerge today in the selection of material it offers from the nation’s “books,” and in the interpretations it puts on the figures. More will come at the economic summit, though, for basic information on the economy and on Government finances, very little more than the usually published figures is likely to appear. The novelty will be in the exposure of official opinions and recommendations that normally do not come to light. This may lead to the conclusion that “opening the books” was not the best title for the operation. Airing official opinion to lend weight to Government decisions may prove a more apt description of the exercise.

The summit has no power. Those participating may sit briefly in the House of Representatives, but they are there only as the guests of the Government. At best, they can offer advice and hope to influence the country’s elected rulers. Putting new policies into law is a matter for Parliament. Only when the Budget is produced will the country finally know the worst, and what the Government intends to do about it.