Retailers told not to plan on boom year

Press, 7 April 1987, Page 2

Retailers told not to plan on boom year

Wellington reporter The business community would be unwise to plan this year on the assumption that the Government will produce a consumption boom based on cheap credit, according to the Undersecretary for Trade and Industry, Mr Peter Neilson. He told a Retailers’ Federation seminar in Auckland yesterday that an example of how serious the Government was about maintaining a more stable fiscal and monetary policy could be seen in how it was approaching this election year. In the last three election years the deficit had been allowed to expand and the money supply had exploded to make voters feel better on election day, and more kindly disposed towards the Governmennt. The cost had been higher inflation, unemployment and business stagnation in the year after the election, Mr Neilson said.

That would not happen in this election year. This

consistency introduced stability and predictability into macro-economic policy, which would help businesses plan ahead. The Government was fully funding the internal deficit, he said, and its anti-inflationary strategy was working. After the GST “hump,” inflation was expected to trend downwards after the March quarter, and the latest Institute of Economic Research forecast was for 9 per cent inflation during 1987-88. But the Democrats' finance spokesman, Mr Alisdair Thompson, said Mr Neilson “did not know what was going on.” Last year alone there had been a $lBOO million increase in the money supply allowed by the Government and the year before it had been $2400 million. The trouble was that none of this extra money had been used to finance investment to create real wealth and employment, Mr Thompson said. It had all been used to fund a boom and parasitic financial speculation based on expensive credit.