Dollar strength ‘will not cut living cost’

Press, 16 August 1985, Page 1

Dollar strength ‘will not cut living cost’

PA Wellington Reduced petrol prices and the strong New Zealand dollar will not bring a drop in the cost of living, says the Leader of the Opposition, Mr McLay. Prices were unlikely to fall as the strong New Zealand dollar had reduced export incomes and manufacturers and traders were having to absorb high interest rates and increased costs, he told a post-caucus press conference yesterday.

“Other than the cost of petrol itself, I don’t think we can expect to see any reduction in the cost of living. “Commercial organisations have been absorbing increased costs and rising interest rates for months,” he said.

The strong New Zealand dollar, which had gone from

45c (U.S.) to 55c (U.S.) in the last two months, had forced the 5c cut in the price of petrol and diesel announced by the Minister of Energy, Mr Tizard, Mr McLay said.

“The decrease in the cost of petrol does not in any way compensate for the loss of value to exporters in terms of the export price of their particular commodi-' ties.”

The strong dollar had attracted Eurokiwi issues in the last two months worth $1252 million, compared with $137.5 million in six issues from October to November last year and 10 issues in the first six months of this year worth $232.5 million, he said. In the last two months, bull beef prices had dropped 68c a kilogram on the United States market, or $ll2 for an average weight beast of 205 kg, he said.

“This is a direct result of the buying pressure being imposed on the New Zealand dollar.” Unless there was a change of Government policy, the dollar would remain high in the next two months, Mr McLay said. The New Zealand Party leader, Mr John Galvin, has objected to what he terms the “Santa Claus” attitude taken by the Government in its announcement of a petrol price drop. “Bearing in mind its commitment to a more open unregulated economy, the Government should recognise that such changes in the pricing of fuel should be automatic and not subject to Government decision,” Mr Galvin said yesterday.

However, he welcomed the decrease in the price of petrol, saying it was good news for consumers.

Further reports, page 4