‘Govt will win battle to reshape economy’

Press, 19 September 1985, Page 44

‘Govt will win battle to reshape economy’

PA Wellington The former Australian Treasury Secretary, Mr John Stone, believes that the New Zealand Government will win its battle to reshape the economy although the next few months will be difficult. He gave no figures in a report for the Melbourne stockbroker, Potter Partners, but he said interest rates and inflation would fall in the first quarter of 1986 and the exchange rate would weaken. Mr Stone’s forecast generally supports analysts’ expectations that the 16.6 per cent consumer price index inflation rate in the year to

June will fall to single figures and interest rates, now about 25 per cent, will also decline. Mr Stone said he expected no softening of the policies of the Minister of Finance, Mr Douglas, which over the last 14 months had unravelled a tangle of regulations, including controls on foreign exchange, prices, wages, and rents.

“I take the view that . . . as (the Government) approaches the middle of its Parliamentary term, any rational political calculation will show there is no turning back,” he said. He said the Government would find the next few

months to be difficult because of high interest rates and a strong local dollar, now about US52c compared with US44c when it was floated in March. Mr Stone said that Government expenditure, while benefiting from the removal of various subsidies and other obligations, was still over-burdened. The heavy accent on welfare programmes could not be sustained in the long run if the economy was to remain healthy.

He criticised New Zealand for excessive timidity in allocating resources and abandoning import controls.