Pay round of 15% ‘could raise inflation 5%’

Press, 14 October 1985, Page 4

Pay round of 15% ‘could raise inflation 5%’

by

PATRICIA HERBERT

in Wellington

A wage round as high as 15 per cent could add five per cent to prices next year, says the Minister of Trade and Industry, Mr Caygill. Mr Caygill told the grocery manufacturers’ annual conference in Christchurch at the week-end that the latest consumers’ price index figures had been good news. However, New Zealand had not yet won the battle against inflation. The index fall to 2.8 per cent was greater than the reduction achieved in the first three months of the earlier price freeze which, even six months out, had brought the movement

down only to a quarterly rate of 2.7 per cent, he said. Mr Caygill declared his appreciation of the restraint businesses had shown in keeping prices down. The forces which had produced high increases in the first half of this year had clearly worked their way through the economy, he said. New Zealand should now be entering a phase of greater price stability, but this would depend f on moderation in pay demands. The Government’s task was to ensure that inflation stayed low, Mr Caygill said. In this it was being helped at present by the strength of the dollar which had brought price cuts for petrol, cars, and imported

fruit and wheat. The Government had other moves it could take to reinforce the downward trend. In particular, it could foster a more competitive trading environment within New Zealand. The liberalisation of import licensing and tariff reductions would help by increasing competition from overseas and thereby constraining local manufacturers from simply passing on their cost increases, Mr Caygill said. This would be a factor in the review now under way of the Positive List of Goods and Services. Already six items had been removed: motor-vehicles, lead, ferti-

User, freight-forwarding, barbed wire, and nuts and bolts.

Consideration of the rest of the schedule would be completed soon, Mr Caygill said. Included on it were canned foods and pet foods, frozen and dried vegetables, and industrial detergents.

Another initiative to encourage competition was the Commerce Bill, now before a select committee, he said. It would introduce sanctions against restrictive practices, revise existing merger and take-over provisions and the current price control mechanism, and subject traders in a dominant position to extra restraints.