No priming of economy—P.M.

Press, 19 December 1989, Page 6

No priming of economy—P.M.

PA Wellington The Prime Minister, Mr Palmer, has pledged there will be no artificial priming of the economy before next year’s election. “The Government’s economic strategy does not involve interfering with the economy to provide it with some sort of artificial stimulus that will provide a short-term political gain to the long-term detriment of the economy,” he said yesterday. Speaking at his postcabinet press conference, he said the economy was in a period of consolidation and the Government would not be changing its macroeconomic policy. There was no need to.

“There has been some commentary about the level of domestic demand being weaker but of course this recovery was never going to be demand led and indeed what we are positioning ourselves for is an export-led recovery — one which will be sustainable,” Mr Palmer said. “It is not part of the cyclical nature of the economy where you pump it up in election year and then let it go bust after. “I want to make it abundantly clear to everyone who is a decision maker in the economy that there is going to be no artificial pump priming of the economy in the course of election year.” Mr Palmer said he thought

some of the predictions about the economy lately were on the gloomy side. “I invite people to take a fresh look at the economy and the indicators in late January and see how they are then,” he said.

There had been some good signs recently. Retail trade, newcar registrations, merchandise exports and residential dwelling permits were all up, although there had been a “bit of a slump” in the commercial building area. The balance of payments had shown a sustained improvement and long-term overseas debt had been reduced by $1 billion in the year to June.

The Government believed unemployment had now reached a plateau and would start going down. Mr Palmer said it was clear the fundamental elements of macro-economic policy were sound and, while there would be continuing reform in the microeconomic area, macroeconomic policy would not be altered.

He thought interest rates would head downwards long term, despite temporary pressure. “I don’t think there is any need for interest rates to move up and I think the policies we have established will re-establish a downward trend on inflation as well,” he said.