Bank Expects Cut In Trade Surplus

Press, Volume CV, Issue 30957, 13 January 1966, Page 14

Bank Expects Cut In Trade Surplus

“In spite of favourable terms of trade recently, New Zealand’s balance of trade—the margin of export receipts over import payments— has not increased as much as could have been expected,” says the Commercial Bank of Australia in its latest financial review.

“Since 1950. New .Zealand's terms of trade have shown quite substantial variations. These have been largely caused in the export field, as the major exports are few and subject to the vagaries of supply and demand which typically beset primary producers. Import Prices “Import prices, on the other hand, apart from the first three years of the 19505. have stayed extremely stable, and any movements have not given rise to a truly discernible upward or downward ! trend. To a large extent this can be attributed to the I great variety of items, in terms of kind and source, which constitute the Dominion's imports. “For this reason, individual price movements tend to offset each other.” The bank says that in the year to March, 1966, “while the growth in export income will be only marginal, total import payments may rise by about 9 per cent, or £3om. “The surplus recorded on trade transactions in the March. 1965, year of £s6ra will be cut by half to around

:i£2Bm in the year to March next. Ease Demand : “The sharp drop in the surIplus at a time of generally ) favourable export prices em(phasises the need to reduce high demand pressures within rhe economy. This would ease the demand for imports and al the same time relieve excessive pressure on resources, particularly labour and finance, allowing the export (section to compete more effectively against domestic industry.

“By Ihe same token, the cost structure will he kepi down because producers will have less need to outbid each other to obtain resources. This strengthens the position of exporters in overseas markets.

“It is essential that the balance Of trade be improved as (invisible payments 1o overseas countries continue to in- , crease with more goods being traded,” says the bank. “New Zealand’s aim, therefore, must be to cure the ! balance-of-payments position (rather than suppress the (symptoms and distort the [functioning of the economy (by an extension of import : controls.

“Laudable” “Tlie Government's expressed determination to remove direct import control is laudable, but to the extent that this is done, internal pressures leading to rising cost structures and demand for imports must be dealt with resolutely. “Monetary policy alone is not a sufficiently reliable nor predictable instrument for this purpose,” says the bank’s review. “On the positive side, with the terms of trade favourable, export action is vital to diversify trade and to expand the volume of exports into new markets.”