Banker sees tough year for business

Press, 4 January 1988, Page 8

Banker sees tough year for business

This year was likely to be a difficult one for New Zealand business, said the chairman of the New Zealand Banker’s Association, Mr Brian Weeks. The rebuilding of confidence is the key question facing the New Zealand economy in general and financial markets in particular in 1988. Bankers had noticed, particularly since the sharemarket decline, some uncertainty and lack of confidence. This had not been helped by reports of difficulties being felt by some public companies, Mr Weeks said. Throughout 1987 one of the key objectives of Government policy had been the necessity to reduce inflationary expectations. This had given rise to the maintenance of high levels of interest rates which in turn had effected productive investment. The banks felt Govern-

ment policy for the coming year should be designed to ensure recent downward trends in interest rates were not reversed and that businesses should be able to plan on the basis that finance continues to be available at declining rates of interest. This way the Government’s objective announced in the economic statement of December 17, to take more positive action designed to reduce the Government deficit should hopefuly reinforce these trends. The impact of the Government’s other recently announced initiatives, particularly in the area of company taxation, would also be important, he said. Provided the Government’s objectives to reduce expenditure were realised then the lower rates of company tax should assist growth in productive investment.

Mr Weeks sounded a note of caution in relation to the Government’s recent tariff cuts. Although the association agreed with the Government’s general tariff policy objectives, Mr Weeks said that the proposed monitoring of the tariff cutting process by the Economic Development Commission needed to be effective. \ Tariff policy would be adjusted if this was found necessary. Manufacturing industry would of course find it easier to cope with tariff reductions if these reductions were matched by a lower real exchange rate, he said. Banks would be watching very closely the way in which specific policies were developed further under the umbrella of the Government’s recent economic statement which had their qualified support.