Investments in interest’ criticised

Press, 9 January 1986, Page 4

Investments in interest’ criticised

PA Wellington New Zealand could not indiscriminately invest in projects perceived by the Government as being in the national interest, said the Minister of Finance, Mr Douglas, yesterday. That was demonstrated by the restructuring of New Zealand Steel. He said that the Opposition spokesman on finance, Mr Bill Birch, recently suggested that most public sector projects did not achieve a 10 per cent rate of return and that few private sector projects achieved it either. Those comments were symptomatic of an attitude which caused the economy to perform far below its potential for many years, Mr Douglas said. Poor returns from investments in the economy were largely responsible for the country’s poor economic performance, he said. “Projects in either public or private sector which need to be supported by Government subsidies, guaantees or high levels of protection simply impose a tax on other activities in the

economy,” Mr Douglas said. Subsidised electricity and coal prices, for instance, must be made up either by higher prices for other consumers or by the taxpayer.

New Zealanders had an obsession for supporting things which were large and visible. That put other businesses which, because they were either small or uninfluential, at a disadvantage. “It is not good enough to tolerate low rates of return in new enterprises,” said Mr Douglas. “If we are not getting good returns from the investments we make we are condemning ourselves to a lower standard of living.” Any enterprise could be made viable if the Government were silly enough to subsidise to an unlimited extent. “We could make Otago the banana-growing capital of the world if we gave large enough subsidies for glasshouses and heating costs,” he said. “It would be viable by Mr Birch’s standards, but that ‘viability’ would not make it a good idea.”