The Press FRIDAY, APRIL 28, 1961. Monetary And Economic Council

Press, Volume C, Issue 29499, 28 April 1961, Page 12

The Press FRIDAY, APRIL 28, 1961. Monetary And Economic Council

The Monetary and Economic Council set up in accordance with the National Party’s General Election policy must demonstrate its value in practice. The new body start* life with several clear advantages. The three member* are men of standing. knowledge, and ability in economic and financial affair*. Th* council will be, in the Words cd the Prime Minister, “independent and “ completely free from poli- “ tksfl control It win have the right to publish its report*. But when due weight is given to these advantages, the fact remains that the council is no more than an addition—and it should be a useful addition—to the quite long list of the Government’s existing advisers, official and semi-official, on monetary and economic affairs. These advisers are headed by the Treasury, the Reserve Bank and the Department of Industries and Commerce; the economic services of the producer boards are quasi-official advisers in specialist fields. Unofficial advisers include the economic services of the trading banks and the newly - established New Zealand Institute of Economic Research, a body sponsored by a representative range of banking, insurance, importing and exporting, manufacturing, wholesale and retaU concerns in New Zealand. The new council will take its place, therefore, among a multitude of counsellors; it might establish for itself a useful role in reconciling conflicting advice from other sources. The council will be a part-time body with “ a “ small full-time secre“tariat It is common ground, as the first research bulletin of the New Zealand Institute of Economic Research says, that a much greater body of factual knowledge is required if growth is to be studied and policies framed with confidence. But can an organisation with “a small full-time “ secretariat ” fill these large gaps in our knowledge? Can “a small full“time secretariat” be expected to do more ‘han use statistics already available to the Treasury, Reserve Bank and other advisers of the Government, statistics upon which, for example, the annual Economic Survey presented by the Minister of Finance is based? Without knowing more than is already available to the Government’s advisers, can the new council be expected to give better and more convincing advice? Can it, indeed, add usefully to the quality and volume of advice already available? The terms of reference of the council are exceedingly wide and cover most aspects of economic policy, both immediate and distant. The terms of reference fall generally into line with the functions outlined in the National Party’s 1960

election policy. That manifesto asserted that “ adequate opportunity will be “given to the public, both “ individually and thrpugh “ organisations, to make “ representations to the “council”. How the new council gives effect to this provision will be a matter of some moment to persons and organisations interested in the council’s power to report on ‘any reforms in “ the monetary system it “ considers desirable ”. As a body “independent and “ completely free from poli- “ tical control" the council would appear to possess potentialities for objective reports and surveys unrivalled among the Government’s official advisers. Will independence and objectivity survive clashes with politicians ar with other official advisers of governments? The experiment is an interesting one, for it challenges—or at least poses the possibility of challenging—the accepted methods by which monetary and economic policy is determined in a democratic State. This is ordinarily a matter of day-to-day consultation between the responsible Ministers and their departmental advisers. There are, inevitably, differences of opinion; and they have to be resolved. They are usually resolved by compromise. But if no compromise is possible the Government, which has sovereign power through its majority in Parliament, must have its way. In any case the Government must take responsibility for monetary and economic policy however arrived at; and it is quite rare for the rebuffed official adviser to resign or to make known his disapproval in some other way. The implication in the arrangements announced by Mr Holyoake is that the Monetary and Economic Council will not only be permitted, but positively encouraged, to make known any disagreements it - has with the Government. And to believe there will be no disagreements is to argue a far greater measure of political disinterestedness in governments than anyone has a right to expect The trouble is that economic wisdom is often electorally unpopular Perhaps the first decisive test of the usefulness of the new council will come when the present Government is framing its election policy in 1963. It is hardly likely that the council would have approved some of the means by which the political parties have wooed the voters in recent years; but will a government accept such a one-sided discipline as is implied in this »esponsibility of. the Monetary and Econonjc Council .to pronounce from timV to time on the management of the national economy? The raised eyebrows of individual economists have not been notable deterrents to imprudent policies in the past