National foresees bleak inheritance

Press, 29 May 1985, Page 1

National foresees bleak inheritance

PA Wellington The Labour Government would bequeath its National successor in 1987 with 12 significant economic areas of concern, said the Leader of the Opposition, Mr McLay, yesterday. He told Petone Rotary Club these would be: A much larger Public Service. New Government departments. High interest rates “bedded in” for relatively long terms. Less spending on productive investment. Substantially increased social welfare spending. A high number of families relying on a social welfare benefit. A large number of New Zealanders paying at least one tax (GST) which they could not afford.

Many New Zealanders paying more total tax. Trade unions and businesses which had become accustomed to high rates of inflation (which would create long-term inflationary expectations). A Government deficit which if reduced at all would have been achieved by increased taxation revenue rather than decreased Government spending. Government spending which would still be a high percentage of the gross domestic product. GST which would impose a crippling burden on small businesses and which would require more than 1000 public servants to administer. In a follow-up speech to the address he gave the Canterbury-Westland branch of the Society of Accoun-

tants a month ago, Mr McLay said it was a widely held view in the financial marketplace that the Government could and should be pushing interest rates down 2 to 3 per cent.

The Government’s belief that it would reduce inflation with high interest rates was not confirmed by its record. The Government was now perpetrating a number of economic myths. Mr McLay listed these under the headings of tax reform, the claim that the Budget deficit had been reduced, economic growth, interest rates, lower unemployment and who was responsible for it, and the free market economy.