National in 1981

Press, 12 February 1986, Page 12

National in 1981

has since been mainly adopted by Labour. It recommended a more realistic exchange rate, reform of import protection, more internal competition and the removal of subsidies, a reduction of the internal deficit to 3 to 4 per cent of gross domestic product, control of the money supply, tax reform, and an attempt to find some sort of incomes policy to restrain the growth in wages.

The former New Zealand Party leader, Mr Bob Jones, had been critical of the Treasury when Labour opened the books for not giving National consistent advice, but the

documents show that the advice was essentially similar.

Mr Douglas asserts that the advice “had spelt out the madness of the National Party’s policies over the last 8y 2 years.”

"The National Government had lifted Government spending from 38.2 of G.D.P. in 1981-82 to 39.2 per cent in 1982-83, then to an all-time New Zealand record of 40.8 per cent in 1983-84. Labour has cut Government expenditure as a percentage of G.D.P. to 37.9 per cent in 1984-85 and about 38 per cent in 1985-86,” said Mr Douglas. The 1981 economic

overview included a warning about the implementation of its recommendations: “In the present economic situation of high inflation and large deficits and considering the rigidities in the New Zaland economy, we should not employ an excessively restrictive policy aimed at reducing inflation quickly as this could produce an unwarranted reduction in output and a very slow response in terms of resource reallocation in the economy.”

The Treasury said that a gradual approach would be best.