Production Incentives Sought In Budget

Press, Volume C, Issue 29503, 3 May 1961, Page 16

Production Incentives Sought In Budget

(N.Z. Press Assn.—Copyright) WELLINGTON, May 2.

The importance of providing incentives to the export industries in the next Budget was stressed by the research officer of Federated Farmers (Mr J. G. Pryde) at the -annual South Taranaki confe-ence of the organisation in Hawera today.

Mr Pryde said that if only a portion of the capital at present being invested in housmg were diverted to the State Advances Corporation and to the Marginal Lands Board, the nation generally would gain. But. he added, he was not only concerned with giving incentives to the primary exporting industries. “I want to see them go to any industry which can export its products and sell them in the markets of the world.”

At present New Zealand was suffering from external insolvency and internal inflation, he said. The fact that she was in such a serious balance of payments position at a time when import controls had been applying was surely an effective answer to those who believed that her problems might be overcome by the application of import restrictions.

The Prime Minister (Mr Holyoake) had already referred to the need for giving incentives to New Zealand’s export industries, and the Budget was the logical document in which to reveal their extent and nature, said Mr Pryde. In the current situation the Minister of Finance must see that his overfall receipts at least covered his total expenditure. otherwise his Budget would have an inflationary gap.

The Budget must aim at creating tighter conditions in the economy and less protection to that marginal fringe of industries whose soecial position permitted them to bid up the price of the resources which were also required by the export industries.

A second important principle was to increase taxes on the ways in which people spend their money, but reduce taxes on their efforts to earn it, Mr Pryde said. One of the weaknesses of New Zealand’s tax system

was that it provided inadequate encouragement to the primary industries to earn higher incomes. Yet. unless the farming and forestry industries expanded their output. the country’s prospects were not bright. To make increased production possible, the farming industries had to plough back a large portion of the net incomes into their farms. Estate duties in New Zealand, hqwever, had the effect of punishing these efforts. To encourage greater investment in avenues which would increase output, there was scope for increased depreciation allowances on plant, machinery or equip-

meat There was also scope hiXTleve" of annual capital expenditure than the £3OO allowed on win’ah’ead o f the economy’s achievements in other avenues, parPryde said. ‘Political considerations have made the huge segment of Government current account expenditure like the ratchet—flexible only one way, in this case upwards.” Annual additions of capital from the Government for agriculture were now on a very much reduced scale. Fortunately for New Zealand, the primary industries had in the post-war period used their own funds for much of the finance necessary for capital investment to achieve their increased output, but it would be dangerous to assume that the State Advances Corporation should play a diminishing role in financing New Zealand agriculture in the future.