Economic reassurance sought

Press, 23 September 1988, Page 2

Economic reassurance sought

Political reporter The key issue at this point in New Zealand’s economic history is the lack of business and investor confidence, according to the Opposition spokeswoman on finance, Miss Ruth Richardson. She told the Institute of Directors in Wellington yesterday that what business and investors were looking for was leadership from the Government and a clear sense of economic direction. They were also looking for some reassurance that unethical or opportunistic corporate behaviour would not be allowed to damage the reputation of New Zealand’s capital market any further. But the public debate was not really focused on these points, Miss Richardson said. Nor was it exposing a significant gap in the Government’s economic policy performance — the need to turn New Zealand’s economy into a saving rather than a borrowing one.

Business and investors needed to have some confidence in the direction in which the Government was heading and in its consistency of approach. Increasingly, business confidence was recognised as the key ingredient of an economic turnround, she said. . Recent minor improvements in some economic indicators apparently jus-

tified to the Prime Minister the chance to “take a breather,” she said. Inflation, far too slowly, and at far too great a cost to the economy, was at last coming down; terms of trade were strong, for the time being; the dollar had eased in line with some downward movement in interest rates. “Why then no chorus of hurrahs and announcement of investment plans?” she said. The reason was that business could not see where the economy and economic policy were heading and, because of uncertainty over these two things, interest rates were still high. There was still worry that the wage round would award pay increases unrelated to productivity and profits, Miss Richardson said. There was even greater questioning about the country’s political leadership and, therefore, about control of State spending, the level of public debt and of interest rates and inevitably some concern whether the Government would succumb to the temptation to try to inflate its way out of its problems.

Even a year ago such a thought would have been greeted with scepticism, she said. Now, with the Minister of Finance, Mr Douglas, hemmed in and the big spenders on the loose again, who knew?