Douglas defends financial policy

Press, 28 January 1988, Page 3

Douglas defends financial policy

By

PETER HALLWRIGHT

of NZPA in London

Most countries attacking inflation experience high interest and exchange rates, the Minister of Finance, Mr Douglas, has told London businessmen.

“Our policy has been aimed to get inflation down,” Mr Douglas said after a speech to the London Chamber of Commerce. He added that he knew of no country which had undergone that “disinflationary process” without quite high exchange and interest rates at the same time. Unlike some other countries, New Zealand had been able to maintain output and still have some growth in the economy during the period of adjustment, he said. “We can look forward to some fairly positive growth in the future I think,” he said. Mr Douglas conceded investment had “levelled off” in some areas, but it had been more concentrated than before, with considerable investment in tourism and horticulture. “I think what we are

seeing in New Zealand and what has been happening over the last two years is much heavier utilisation of existing assets,” he said. The tax incentives of the last National administration had created overinvestment in many industries and the Government was looking to redress the imbalance with plans for reduced company tax. “My view is that a much lower tax rate is likely to attract investment,” he said. Turning to corporatisation, he said the Government was likely to sell the Development Finance Corporation to a single buyer. Unlike its British counterpart, the New Zealand Government had no plans to seek wider share ownership with every selloff. New Zealand Steel’s sale last year to Equi-

ticorp Holdings was made on the understanding that there was a need for the buyer to take a controlling interest so it would have the necessary commitment and management expertise behind it. “And I think that might well be the case with the sale of the DFC. “The Government would, however, seek wider share ownership when it sold Air New Zealand and the Bank of New Zealand as part of its plan to cut its overseas debt by $l4 billion over five years. "Foreign ownership of privatised companies would not, in general, be a problem,” he said. “But in the case of Air New Zealand, New Zealand control of the airline was essential to maintain its present status for landing rights.”