Economy at crossroads, says Lange

Press, 8 December 1988, Page 2

Economy at crossroads, says Lange

By

ADRIAN BROKKING

The year 1989 will be the turning point for the New Zealand economy, the Prime Minister, Mr Lange, told a gathering of businessmen in Christchurch yesterday.

The country had now reached the second stage of economic reform — the shift of investment into efficient activity, he said.

Next year would be the phase of investment and growth. During the last four years, the first stage of reform, the amount of inefficient economic activity had been reduced. That was done by opening up the economy to Competition, by lowering levels of protection, and removing distorting forms of incentive and subsidy. However, the indicators had not shown up an intention to make new investments.

“If investment does not reappear in the form of new industries, new businesses, and new jobs, we are no better off and the effort of the last few years will not have been worth it,” Mr Lange said. “We must make sure it is worth it. We know what this and other regions have been through. Canterbury has carried more than its share of the costs. The challenge now is to make certain that Canterbury gets its fair share of the benefits.

“It is plain that squeezing out inefficiency does not in itself produce economic growth. If we improve productivity simply by piling up the numbers of unemployed there will come a time when ,as a society we can ho longer sustain it. “That is why the Government is committed to growth. That is why we must look to the regions to provide the exports which will be the basis for growth.

“Our future relies on exports which use our skills and our natural resources and take advantage of innovation.

“We then have to look at what is needed to encourage exports and encourage growth,” Mr Lange said.

“We cannot build walls around our industries or pretend that the world outside this country does not exist. Nor can we sacrifice the prospect of sustainable growth for the sake of some short-lived stimulus to economic activity. We need ... a climate ... favourable to investment.

“We plainly need lower rates of interest.

“There is no uncer-

tainty about the Government’s fiscal policy. There is a wholehearted commitment in the Government to the fiscal policy which has been followed consistently since we took office. Our goal is and will continue to be to reduce the Budget deficit. There is no abandoning of it and no possibility of abandoning it” , The economy, would not spark into life because of some dramatic announcement by the Government, Mr Lange said. Investment and growth would not occur until Government, business, employers, and the workforce took each other into their confidence.

“We are a tiny country on the edge of the world and we cannot hope to compete internationally unless we are all pushing in the same direction. “There should be greater flexibility in the labour market but it should be a negotiated flexibility. “People will make a commitment to a growing economy if they have a stake in that economy,” Mr Lange said. Analysis, page 6