Economic criticism ‘likely to reinforce pessimism’

Press, 6 December 1989, Page 2

Economic criticism ‘likely to reinforce pessimism’

By

BRENDON BURNS

in Wellington ■■

Criticism, including that by the Minister of Police, Mr Douglas, is likely to reinforce pessimism about the economy, says the Minister of Finance, Mr Caygill. Comments by Mr Douglas, the National Bank, and Sir Ron Brierley in recent days were not helpful, he said yesterday. Criticism was “likely to reinforce people’s pessimism rather than have them focus on the good things that I think are there.” In the longer term, investment opportunities being provided were more important. Mr Caygill said economic confidence could in the short term be affected by a host of factors, including arguments among politicians. Last week, Mr Douglas told the Mont Pelerin society in Christchurch that the Government was “coasting.”

He said it was compromising on tough decisions to gain political advantage and failing to introduce reforms for economic growth. Similar views have been expressed by the National Bank, Sir Ron and other . business leaders. The Prime Minister, Mr Palmer, said on Monday that he had cleared Mr Douglas’s speech and was not worried by its contents. In a speech on Monday, Mr Caygill said critics suggesting the Government was adrift or lost were talking nonsense. Some of those arguing for more reform had not thought through the consequences or did not care. The speech described Rogernomics as “flamethrowers and Armalites” which had been discarded

but said the Government still had the steel. Mr Caygill agreed yesterday that Mr Douglas was among the critics he was answering. “It wasn’t purely and simply a reply to that, otherwise I’d have come out and said so. Roger isn’t by any means the only person who has said, ‘Where’s this Government going?’ ” He said the change in leadership in the Government inevitably led to questions about whether there was an accompanying change in direction. “That question won’t go away until a degree of record has established itself.”

Mr Caygill confirmed that he had used the speech to send out a signal that Mr Douglas’s flat tax proposal was not being pursued.

He had said that, abolishing the top tax rate and slashing welfare support

wqujd deppiaTically alter the shape of society.

The rich would benefit and the less fortunate would be “simply be left looking forlornly through the window,” he had said. Mr Caygill said his views on flat tax had not changed. “I don’t myself give a high priority to flat tax and the notion that it and labour market deregulation would somehow introduce a qualitatively better performing economy is, I think, dreaming...” Mr Douglas’s criticism may hot have been all that harmful, he said,

“I don’t think it is all that significant. I think that the more important thing is what the Government does.”

The most significant event of recent days was not Mr Douglas’s speech but the Government’s decision to free up shop trading hours.