Pay action 'out’

Press, 14 October 1985, Page 4

Pay action 'out’

r from front page ’

ances claims which are expected to take them past 20 per cent.

There seemed to be an impression abroad that the Government would relax its tight control of the money supply to accommodate high increases, Mr Douglas said.

“It will not do that. It is not possible in the light of what we want to achieve for the New Zealand economy, but, more particularly, it would be counter-produc-tive.”

The “dramatic slowdown” now apparent in inflation — a reference to the latest consumers’ price index showing a quarterly rate of 2.8 per cent — would be reversed to the longterm detriment of New Zealand’s producers, Mr Douglas said.

They would lose their competitive edge and New Zealand would be lost again into the inflationary spiral of the last decade, precipi-

tating a drop in living standards.

Mr Douglas said there had to be pain in the recovery. “We simply can’t have an economy that performs worse than any other country in the O.E.C.D. for 10 years and expect that the adjustment will be totally smooth and that no-one will be adversely effected,” he said.

Mr Douglas has consistently refused to nominate a guideline for the round and yesterday repeated that there was no "magic figure.” He expected a dispersion of settlements based on an industry’s ability to pay and the demand for skills, but the onus had to rest with the wage bargainers. “The Government simply cannot take every business decision. That has happened for nine years and we are not going to do it again,” Mr Douglas said. He seemed determined to apply the same “hands-off approach to the exchange rate. Yesterday he con-

firmed his statement from Seoul, that he did not intend to intervene.

Beyond that, Mr Douglas declined to comment except to say that he would talk to the Manufacturers’ Association on Wednesday about the currency and related issues. ■■ •*

This may tie in with concerns already expressed by the Prime Minister, Mr Lange, and an Associate Minister of Finance, Mr Prebble, at the slow response of the business community to the rising dollar.

Mr Prebble intends to take an initiative to today’s Cabinet meeting regarding what the Government might do to oblige businesses to drop their prices for imported goods. An obvious mechanism would be to reduce tariffs again, or to threaten to. This may be what Mr Douglas has in mind.

He said yesterday that he had not yet read Mr Prebble’s proposal but that he had talked with Mr Prebble by telephone.