Budget deficit to be halved?

Press, 26 October 1984, Page 1

Budget deficit to be halved?

By

MICHAEL HANNAH

in Wellington

The Government last evening announced its target to cut the Budget,deficit by at least half so as to have a “significant” impact on interest rates. In an address to the Grocery Manufacturers’ conference in Rotorua, the Minister of Trade and Industry, Mr Caygill, gave the first indication so far of the extent the Government is contemplating reducing the Budget deficit. Other Ministers, such as the Minister of Housing, Mr Goff, have referred to a

substantial cut in the deficit, which reached $2.7 billion in the 1983-84 fiscal year.

Mr Caygill’s statement, however, assumes extra significance as it came in a speech deliberately tailored as a prelude, along with speeches planned by other Cabinet Ministers, to the November 8 Budget. Calling for co-operation from all sectors, Mr Caygill said that the Government was very aware of the urgent need to reduce . the present deficit of 9 per cent of gross domestic produc-

tion, and to reduce interest rates. “To have a significant impact on interest rates, the deficit must be halved at least,” he said. “The Government is challenging the whole community to play its part in revitalising the economy.” Mr Caygill reminded his audience of the communique produced by the Economic Summit Conference, and asked for specific co-opera-tion from grocery manufacturers in controlling prices. The price freeze would definitely end on November 8, but there would not be open slather on price rises

after that date, Mr Caygill said. He expected that discussions with manufacturers and other measures, such as a revision of the trade practices section of the Commerce Act, and the possibility of individual price control would restrain prices. However, he saw a need for the Government to retain some residual power, allowing it to investigate pricing and impose individual controls if necessary.

He said he considered the liberalisation of import licensing a potential inhibitor of price increases also, but argued that manufacturers should see benefits in increased competition and exports, rather than in protection for domestic industries.

Mr Caygill said he suggested that manufacturers should not see the likely increase in road-user charges as threatening, nor as only involving the simple question of freight charges. Railways was finding the present year more difficult than the last, principally because of competition from heavy road transport which was not working on the same user-pays principle, he said.