Continued jobless rise—Westpac

Press, 5 December 1988, Page 19

Continued jobless rise—Westpac

NZPA Sydney The New Zealand Government can do little to avoid further rises in unemployment during 1989, according to Westpac Banking Corp. Because of the Government’s deflationary policies and continuing efficiency drives in the public and private sectors, unemployment figures would continue to soar, the bank’s December “Market Insights” publication said.

Unemployment was expected to rise frdm 9.2 per cent (September, 1988) to 10 per cent next year, Westpac said. “News from Parliament suggests that Mr Douglas retains firm support in Cabinet. But the possibility of further political manoeuvrings cannot be ruled out,” it said.

In the year to October, bankruptcies and compulsory liquidations were up 52 per cent on the previous year, the publication said.

But any return to interventionism could destroy local and international confidence in the Government and would have serious implications for interest and exchange

rates. Westpac forecast a “mild” rise in consumption and export activity for 1989, while price rises should be restricted by the Reserve Bank’s continued monetary restraint.

Good news would continue to appear in New Zealand’s external accounts. The bank forecast that the current account deficit would narrow to SNZI billion in 1989 against SNZI.4S billion in September. “This is the lowest year-to-date deficit since October, 1983. It represents the combined impact of low domestic demand and firm prices for New Zealand’s major exports —

meat, wool, dairy products, forest products and aluminium.” Provided New Zealand met the OECD’s forecast for world growth of 3 per cent over 1989, the outlook was for further strong improvement in the current account balance.

During the next two to three months, bond yields should continue to be underpinned by a number of factors including political tensions, semi-government bond tenders, heavy

weightings in bonds by institutional investors and rising overseas interest rates.

The New Zealand dollar remained well supported despite the upsurge of political tensions.

“Our outlook remains for long-term depreciation tempered by an improving current account balance.”

By contrast Australia’s unemployment would soon hit 7 per cent from 6.9 per cent in October and its current account deficit would improve to sAustlo.s billion (NZ14.078) from sAustl2.sß in October. The bank forecast Australia’s inflation rate to fall to 4.5 per cent in 1989 from 7 per cent this year. The Bankers Trust Australia December newsletter said the fall in Australia’s inflation rate had been disappointingly slow.

“Australia’s inflation rate has been stuck around 7 per cent in 1988 and in fact has re-acceler-ated in the past six months,” it said.

However, by the third quarter of 1989 inflation should be down to around 5.5 per cent, Bankers Trust said.