Govt review of prices likely

Press, 12 October 1985, Page 8

Govt review of prices likely

By OLIVER RIDDELL in Wellington The Government is considering what can be done to oblige businesses to drop their prices while the New Zealand dollar gains in strength. The Acting Minister of Finance, Mr Prebble, said that he was concerned about the slow response of consumer prices to the rising value of the New Zealand dollar. Prices had risen very quickly after devaluation (in July 1984) but now that the dollar was rising, prices should be coming down just as quickly.

“I intend to raise tms issue at the Cabinet meeting on Monday,” he said. Part of the problem seemed to be simply that New Zealand business had no experience of failing prices, could not believe they were falling, and did not know what to do in this new situation. The view of the Government was clean New Zealand was now in a more flexible and marketoriented economy, Mr Prebble said. Businesses needed to make the most of every

competitive advantage; they should be using the movement of the dollar agressively to maintain sales volume. If businesses did not do this, he said, and the public caught on to the fact that businesses had failed to pass on their advantage, there was a risk that people would stop buying until prices fell. New Zealand now had a golden opportunity to lock in low inflation. The Government had set an example of this with lowered petrol prices, which flexibility ought to be extended.