New Zealand tries wage-price freeze
Wellington, New Zealand
New Zealand Prime Minister Robert Muldoon says he is ''stopping the clock for 12 months.''
A wage-and-price freeze is the latest attempt to bring continuing inflation under control in a country where ''stagnation'' is a word regularly applied to the economy.
What worries Mr. Muldoon's National Party government is that inflation has continued to climb here while it has been declining in most other developed countries.
The government is pinning its hopes on big, new, energy-related projects. The key project will transform offshore natural gas into gasoline in a Mobil-backed facility that will be the first of its kind in the world.
But this and other developments in the government's so-called ''think big'' program won't benefit the economy until they begin operating in the second half of this decade.
Labor Party leader Bill Rowling and the rest of the parliamentary opposition Labor Party argue the ''think big'' projects are too expensive, won't create enough jobs to justify the cost, and are unlikely to propel the lackluster economy to prosperity.
New Zealanders are more and more vocal about the size of their tax burden, which finances comprehensive educational, health, and welfare systems. Their complaints about a drop in the living standards and worsening inflation could not wait to the mid-1980s. Mr. Muldoon, therefore, announced the freeze.
Despite the freeze, the New Zealand Institute of Economic Research is forecasting 14.2 percent inflation for the year to March 31, 1983. And unions threaten strikes if prices keep creeping up while wage increases are halted.
Inflation in the 12 months to March 31 of this year was 15 percent - 5 percent more than in neighboring Australia, which is also worried that its rate is climbing while inflation in major Western nations is falling.
According to J.W. Rowe, executive director of the New Zealand Employers' Federation, the best way to break the wage-price spiral is to link wage rises to productivity.
''It's common sense to link wage increases to the ability to pay those increases,'' he says, ''but there's a distinct lack of common sense in wage fixing in New Zealand.''
Ann Hercus, Labor Party spokesman on consumer affairs, says the freeze will not attack the causes of inflation, but will merely store up ''intolerable difficulties'' for the economy.
Union leaders admit inflation will be much less in the coming year than if no freeze existed, but they say the 14.2 percent inflation with no pay rises will be considerably worse than, say, 20 percent inflation - suggeted by some economists - with pay hikes.
With pay and price controls in place, how could inflation still hit 14.2 percent? According to a government spokesman, ''imports are the key. We can control the prices of locally produced goods, but New Zealand imports an awful lot of its requirements. When those prices rise, we can't do anything about it.
''We can't tell the New Zealand marketer to sell imported goods at less than he paid for them.''
There's widespread pessimism in New Zealand about the freeze. Many people don't believe it will work - and there's general acceptance that the economy will probably continue to totter on in its depressed condition, with no immediate relief in sight.
Meanwhile, Mr. Muldoon has announced income-tax cuts. But government critics contend the formula for doing so favors high-income earners.