Aglimmer of confidence

Press, 24 October 1989, Page 12

Aglimmer of confidence

■ Economic confidence is/a.fragile and elusive ’ government can: command its. appearance? Without it, no community is ' New?Zealand has taken an economic Mattering for most of the 1980 s. / Rapid the' last five years have /compounded/the ;effects of the economic constraints./imposed ;byevents in the wider . world? Small wonder that this had become a country.of pessimists; a community reluctant to to invest in productive enterprises. a community that believed things were bad and were likely to get worse. That makes all the more welcome a glimmer of hope from the result of an economic survey published this week. The whole country, it seems, is rather more optimistic than pessimistic about what the next 12 months will bring. More than that, optimism is strongest in rural areas and in the South Island, regions that have been particularly hard hit by economic changes and widespread unemployment. I Consumers, especially in the lower half of the South Island, expect to have more/ to spend in the months ahead. Whether there will be things to buy is another matter unless industrial problems on the waterfront are solved permanently. Even so, it is time for a muted cheer when people begin to believe the times are getting better. Such optimism is an essential ingredient of a real recovery.

There, may* "be prices ,to pay. The country’s, annual rate of inflation was above 7 per cent/at the last measure. The Reserve Bank intends to have inflation below 2 per cent by late 1992, three years from now. That target might only be achieved by further restraints on economic recovery, and harder times for almost everyone. No-one, surely, would want to go back to the bad old days of a few- years ago when inflation hovered close to 20 per cent and the spiral of incomes and prices chasing one another, seemed unstoppable. But equally, no-one would want to go back to the widespread controls of the early 1980 s.

Between those unhappy extremes there is surely a compromise in which fragile 1 optimism can grow more sturdy and the economic lives of most New Zealanders can flourish again. An obsession with controlling inflation is not the way to build economic recovery. Down on the farms, things appear to be getting a little easier. Rural prosperity, and rural confidence, are still the foundations of better times for almost all New Zealanders. If a dash of inflation is unavoidable to fertilise the rural recovery, that is surely a risk worth taking. If confidence cannot be commanded, at the very least it should be stimulated when it makes a rare appearance.