National’s economic aim is to cut deficit

Press, 10 April 1987, Page 1

National’s economic aim is to cut deficit

By '

OLIVER RIDDELL

in Wellington

The chief target of the long-awaitea National Party economic policy, which may be still three or four weeks away, will be to reduce the Government deficit.

Detail of the new policy is being kept under wraps but its broad outlines are now clear. National has a caucus committee sitting to consider the details, portfolio by portfolio, of how revenue may be cut to bring down the deficit. It plans to save about $4OO million in debt servicing immediately by privatising — selling off — the Bank of New Zealand, Tourist Hotel Corporation, Development Finance Corporation, and the commercial parts of the Broadcasting Corporation. In the medium term it will also privatise Petrocorp and Air New Zealand. Beyond that it will look at the corporations just set up by the Labour Government, and may sell off the Forestry Corporation too. But the chief savings it

hopes to make to cut Government expenditure will be in the “hard” areas of social welfare, education, and health. The big millstone is social welfare. More than 60 per cent of that is spent in national superannuation in which no savings can be made in the first year. However, as the age limit shifts from 60 to 65 years, National estimates it can save $13,000 million over 15 years. The National Party is now working through the details of other cuts it can make in social welfare, health, and education. It is not an easy task but most members of the National caucus are convinced that expenditure cuts are the only possible way of bringing down the deficit. The benefits of success would be in reducing in-

terest rates and having the value of the New Zealand dollar drop to about 45 US cents. Having the currency at that level would stimulate all exports, but particularly the traditional farming exports on which New Zealand’s provincial economies depend. It would also help local manufacturers by making their industries more competitive against manufactured and food imports, and that would stimulate employment. National considered increased taxation and then rejected it as unnecessary. Cutting social welfare (other than superannuation), education, and health expenditure on taking office involves some hard political decisions. These are being worked through before the economic policy is announced.