Banker says future may not be rosy

Press, 1 February 1986, Page 22

Banker says future may not be rosy

NZPA-AAP Sydney The chairman of Westpac, Sir Noel Foley, attacked what he called “a wave of ill-informed optimism over Australia’s economic prospects,” in his address to the bank’s annual meeting yesterday. He warned that economic commentators are causing complacency by avoiding mentioning signs “that the future may bring economic decline and a fall in the standard of living.” He described the Organisation for Economic Co-operation and Development’s prediction of a 4.25 per cent growth rate for 1985-86 as “overly optimistic.” He also warned against undue emphasis on monetary policy in the Government’s battle against the current account deficit. If carried on too long it might blight the economy and make long term growth impossible, he said.

“Using monetary policy jas the main tool of econo-

mic management embodies evasion of other pressing issues facing the economy. “Above all, monetary policy is no substitute for a more realistic wages policy,” he said. Sir Noel paid tribute to the four-year-old prices and incomes accord for keeping a lid on inflation during a period of strong growth, and calming industrial relations. But he said the policy had also priced some workers out of jobs, and

added costs to heavily indebted small businesses already hit by the effects of high interest rates. With the sharp depreciation of the dollar, wage discounting was needed, said Sir Noel, despite its poltical unpopularity.

Sir Noel added his voice to calls for an end to the 13.5 per cent interest rate celling. Instead of protecting or subsidising home owners, it was drying up funds available to home buyers, he said.