Warning Against Devaluation

Press, Volume CVI, Issue 31081, 9 June 1966, Page 3

Warning Against Devaluation

CN.Z. Press Association)

WELLINGTON, June 8. Mr A. H. Nordmeyer (Opp., Island Bay) said in Parliament tonight that unless the Government was prepared to grapple more firmly with the balance - of - payments problem it would have to devalue.

“I did not advocate this.” he said: “But there are some people in this country who do.” Everything would be increased in price with devastation. “The cost structure would be increased and the fanners —some of whom advocated this policy would find themselves in a worse position than before.”

The Government’s theory that it was all right to borrow from overseas as long as

it was for capital development did not bear close study.

“New Zealand has now reached a position where it should be able, by the proper management of its economy, to cease borrowing overseas and to live within its income,” he said. “We have reached a chronic condition in an attempt to balance our overseas income with our overseas payments.” Last financial year, New Zealand had deficit of £58.8 million on its current account.

“Had we not borrowed, and in that way minimised the deficit, we wquld, in fact, have not spent 58 million more than we earned.”

Mr Nordmeyer said the bal-ance-of-payments crisis had come at a time when export earnings had been phenomenally high. It is not unusual for New Zealand to face a balance-of- • payments problem at a time .when export receipts were How. “But, - it is surprising to

see this at a time when exports are a record.” Last year the Government drew £25.5 million from the International Monetary Fund and. the overseas assets were down to £63.3 million. “This is far too low -a figure for this time of the year because from now on our assets will decline rather than increase.” he said. Mr Nordmeyer said that it was dangerous to adopt a policy of overseas borrowing. The Opposition believed if overseas borrowing was desirable, only when it was necessary to augment the country’s funds. “We have had figures quoted by the Prime Minister and the Minister of Finance, but they do not include the amount which has been borrowed from the I.M.F.—a total of £25 million, and interest is being paid on it” This amount was debt and it should be included in the country's over-all debt. Mr Nordmeyer predicted [that the increase in'interest

rates on local-body loans was “only the beginning of the storm.” Earlier the Minister of Customs (Mr Shelton) said the Government would like to abolish import control, and

had made the first moves. “But in the present situation it is obvious that it must remain to some extent.” said Air Shelton. “Nobody is sor-

rier than 1 am to have to restrict imports.” The present state of New Zealand’s overseas funds de! manded some restraints on imports for 1966-67. ! “This is not a popular move •in an election year—but the necessary action has been taken which proves that this Government is responsible.”; he said. , I Mr Shelton said that if • Labour became the govem- • ment imports of bananas. ! dried fruits, coffee and cocoa. ■ medicinal and pharmaceuti■cal products, cotton textiles piecegoods, tractors and topdressing aircraft would.be reistricted.

The Opposition had said that if it became the Government it would withdraw from the International Monetary Fund and the World Bank, said Mr Shelton. “These international organisations have assisted with our development in the last two years and it is quite obvious that the implementation of Labour’s policy would reduce New Zealand to a peasant economy."

“Why does the Labour Party express such an aversion to a sensible and prudent borrowing policy? They are at great pains to make the words ‘overseas borrowing’ one of the most frightening terms in the economic language.”

The Government was not ashamed of its policy of borrowing for essential capital I equipment and works—and .would continue with prudent ;and necessary borrowing for ■ these purposes, both in New Zealand and overseas, said ■ Mr Shelton. 1