N.Z.’s Lack Of Capital

Press, Volume CVI, Issue 31117, 21 July 1966, Page 11

N.Z.’s Lack Of Capital

CA’.Z. Press Association? PALMERSTON NORTH, July 20. The main problem with New Zealand today was lack of sufficient capital for development, the Minister of Finance (Mr Lake) told a National Party luncheon in Palmerston North today. This had put New Zealand in a position where it was trying to maintain a faster rate of growth than its resources would sustain. New Zealand, he said, had got into this position through not borrowing enough in the past. He described as crazy the move by Sir Walter Nash to repay a £5O million loan after the war, then Minister of Fanance. In his opinion New Zealand should have joined the World Bank as long ago as 15 years. On Government policy on income, relating to farming, Mr Lake said he could not accept as valid any argument that farmers required more incentives to develop. He had produced six budgets he said, and all contained added incentives to the fanners. Fanners’ Progress Farmers are at present doing quite well as is shown in the recent increased production figures. However, he agreed that Income tax was too severe at present The maximum rate was reached too fast. The Government was

at present setting up a committee to consider the question and it would be sitting within the month. There were, however considerable difficulties to be overcome as a sig-nificant-change would mean a reduction in the return from income tax of up to £5O million.

Commenting on the stringent import control over metal-machining equipment, Mr Lake said that the demand for this sort of equipment in New Zealand was almost exhaustive. However, even under the present controls, if a genuine need could be proved to the Department of Industries and Commerce and the Minister for Customs it could still be obtained. He said that there was a lot of existing machinery already in New Zealand that cculd be used more extensively if the need arose. Talking about import controls in general, Mr Lake said said that it was the National Party’s object to replace import controls by tariffs. However, this could only be done gradually, as the economic situation allowed. External Reserve* In spite of the controversy raging at an international level over the shortage of liquid external reserves a condition of many countries —the indications were that New Zealand’s “moderate and small liquidity requirements” could be met, Mr Lake said. “We have a vital interest in international liquidity because we are a growing country and because we are one of the leading trading nations in

terms of Imports and exports a head of population.” Illustrating the problem of international liquidity, Mr Lake said the exchange reserves of Belgium, France, Germany, Italy and the Netherlands amounted to the equivalent of 22.8 billion U.S. dollars, while those of Britain and the United States combined amounted to 18.5 billion U.S. dollars.

“It is obvious, I think, that Western European countries are over-inclined to hoard reserves—and that carried too far. such a policy could cause problems for world trade.”