Unemployment main concern, says report

Press, 28 August 1986, Page 3

Unemployment main concern, says report

Wellington reporter Unemployment is likely to continue a. 3 a serious problem until the 19905, although New Zealand is set to have a healthy rate of economic growth over the next 10 years, according to forecasts published by the Planning Council. The council’s National Sectoral Working Group predicts unemployment should start to fall in the early 19905, reflecting sustained economic growth until then and a slackening in the growth of the work force. Attempts to reduce unemployment significantly before then would require very large falls in the rates of pay for unskilled workers, the group says. Its report, “Towards 1995: Patterns of National and Sectoral Growth,” provides a picture of change in the New Zealand economy based on consultation with industry groups and the use of forecasting models. The group forecasts the rate of economic growth up to 1995 about 3 per cent a year, with a significant shift in the relative importance of different sectors in New Zealand’s export production. The forecasts include a 1.8 per cent annual growth rate in the number of people employed up to 1990 and a rate of 1.6 per cent for the five years after that. Compared with those increases, the group says, the rise in productivity, which indicates the rate of change of output per unit of labour and capital, is disappointingly low at about 1 per cent a year throughout the period. New jobs are likely to arise mainly in servicing industries, with two-thirds of increased national employment occurring in that sector over the next five years and four-fifths, between 1990 and 1995. Employment growth in primary industries is forecast to slow after 1990 to about 1.4 per cent annually, and in manufacturing

a similar slow down is expected, to about 0.7 per cent.

The group foresees annual output from service industries growing about 3 per cent before 1990, and 2.8 per cent after then.

Primary industry growth should be stronger in the next five years, it says, but then also drop back, to about 2.7 per cent after 1990. Growth in this sector will be held up by the continued buoyancy in horticulture, fishing, and mining, while forestry is expected to rise relatively slowly until taking off strongly after 1990. Manufacturing is expected to have growth lower than that of the national economy, and be round 2.5 per cent after 1990.

Manufacturing will, however, contribute to a significant shift in the composition of New Zealand’s exports. The group says that from a rough equality now between traditional and non-traditional exports the latter will expand to be more than twice the level of the former by 1995. The type of change reflected in that prediction

has been evident long before now, the group says, but its forecast points to the likelihood of present trends continuing and reshaping completely New Zealand’s pattern of exports. The group foresees stagnant or declining trends in traditional, pastoral exporting, with moderate or even strong growth in non-traditional exports, including horticulture, fishing, mineral products, manufactured goods, and services. It suggests that producers may find it more profitable to export lesser volumes than they now expect of themselves in future.

More exports are generally seen as beneficial to the econoihy but the highest feasible rate of growth in producing for export may not be optimal, the group says.

The forecasts include only a marginal growth of imports as a percentage of gross domestic product between 1990 and 1995 (both about 32 per cent). Import penetration will be constrained by the removal of protection across a wide range of industries and the exchange rate impacts of rising demand for imports.