Reduction of inflation unlikely — manufacturers

Press, 10 March 1988, Page 39

Reduction of inflation unlikely — manufacturers

PA Wellington No hope was held that inflation would fall to 5 per cent if huge increases in electricity, rates and land tax went ahead, said the director-general of the Manufacturers' Federa-1 tion, Mr Wally Gardner. "I trust these added cost inputs are not an indication of other increases coming through from the State-owned enterprises and local bodies,” he said. "Under the extremely trying trading conditions facing us today, there is no way-the industrial sector can accept them.” The Governor of the Reserve Bank, Mr Spencer Russell, predicted last

week that inflation would come down to 5 per cent this year, he said. Mr Russell identified | New Zealand’s high inflation between 1974 and 1987 as cause of most economic problems. "In that time, our cumulative inflation topped 432 per cent, [ while Britain's was 244 per cent, Australia’s 183 perj cent, with 148 per cent Jin the United; States and [76 per cent in Japan — no wonder our exporters are having a hard time," Mr Gardner said. I Now, the price of electricity was to rise again, by ’ as miich as twice the inflation rate — anything up to 20 per cent

- as a result of the bulk power . increase and changes in the terms of payment. “Christchurch’s M.E.D. has said it wants a 15 per cent increase,” Mr Gardner said. “Land tax payments this year are demanding even more. Recent revaluations mean more land tax will be raised from the Wellington metropolitan area this year, if there is no change in the tax rates, than from the whole of New Zealand last year," he said. Mr Gardner cited two random examples which showed, in the one case, that land tax amounting to $58,000 in 1987-88 would

rise to $400,000 for the approaching year; in another case, tax amounted to $2600 but would rise to $36,000 later this year. “In addition, local body rates are moving up by about 15 per cent, and in Wellington’s case, the proposal to change the ratio between commercial and residential rates to 75:25 will add a further 15 per cent to rates of commercial properties — at least 30 per cent more that business has to pay,” Mr Gardner said. The consequences on the productive sector if those increases proceeded would be “just devastating," he said.