High $ policy deliberate —Sir Robert

Press, 15 July 1987, Page 6

High $ policy deliberate —Sir Robert

Wellington reporter

Keeping the value of the New Zealand dollar high has been deliberate policy of some of the country’s big commercial enterprises, according to Sir Robert Muldoon. The former Prime Minister and Minister of Finance told the Marlborough Chamber of Commerce in Blenheim yesterday that there was some evidence of this policy. Sir Robert said the burden of overseas debt was likely to be the most difficult single economic problem facing future New Zealand Governments.

Every New Zealand citizen now owed about SUS9OOO in external debt, nearly three times the amount owed in 1984. By comparison each United States citizen owed about SUSISOO in external debt, or about SUS3OO billion in total. Capital inflow had created the United States overseas

debt, he said. There used to be *■ theory that currency relationships and trade balances were self-balanc-ing. Indeed, that had been the only specific piece of economic theory put forward by the then leader of the New Zealand Party, Mr Bob Jones, at the last election. Better informed thinkers no longer subscribed to that theory and believed, correctly, that capital movements were much more important than trade relationships in fixing the value of a currency, Sir Robert said. Capital movements had helped keep the value of the New Zealand dollar up at a time when Its trade balance had been languishing. Over thex years New Zealand had stuck to exchange rates that were fixed for comparatively long periods, with discreet movements implemented as part of Government policy.