The Scope of the Crisis:

The effects of the continuing inflation should be obvious enough to students. People are continually being hit with rises in the prices of everything from groceries to bus fares and tickets to the movies. Students living in hostels will have noted the dramatic increases in the cost of their accommodation, while those in flats will, in many cases, have noticed increases in their rents.

Some people suggest that we could quite happily live with 10% inflation on a continuing basis, year after year, so long as every thing such as prices and wages all increased at the same rate. Perhaps we could, if inflation did work in such an equitable way, but, unfortunately, inflation does not work like that. Continuing inflation would be to the advantage of those who set the prices and wages, and would therefore be to the disadvantage of the wage-earners, to the disadvantage of those who are primarily consumers, and to the disadvantage of those who are in receipt of a fixed allowance, which is only increased after the inflation has taken place, such as students. What such continuing inflation would mean would be that the rich would get richer and the poor would get poorer.

The balance of payments deficit is another symptom of the crisis. The effect of it is to cause the government to have to borrow heavily overseas, which means that we are acquiring huge bills for interest payments, with which we will be saddled for many years to come. Yet, in its latest report, the Monetary and Economic Council suggested that this borrowing would have to continue for some years to come if there were not to be major disruptions to economic stability.

The cause of this balance of payments deficit is the dependence that the New Zealand economy has on the continued importation of a number of basic items, which are paid for by our exporting a very small range of primary products. It was for reasons such as this that the Monetary and Economic Council suggested that New Zealand's economic structure resembled in many ways that of a typical third world country. Our dependence for our economic survival on the continued exporting of meat, wool and dairy products to the developed countries of the Northern hemisphere, so that we become little more than an adjunct to their agricultural production, makes us dependent on these countries, and makes us poor.

The problem of unemployment may not appear to be particularly severe, if it is measured as the total of registered unemployed and people on special work, but that does not reveal the true extent of unemployment. Figures in the latest report of the Monetary and Economic Council show a substantial drop in the number of people participating in the labour force, and when the effect of the substantial net emigration is added, there must clearly have been a substantial reduction in the availability of employment. Therefore, by next summer, students may find it rather difficult to get the jobs they need to supplement their bursaries.

Likewise, a reduced level of economic growth may not appear as a problem in the short term — in fact, some people might regard it as a desirable objective. Unfortunately, however, under our present economic system, static economic states, such as zero economic growth, will not persist, and the likely result will be for the mass of the people to become poorer. Some of these crisis trends are already becoming evident in the building industry, and this can serve as a good illustration of the effects of the current crisis.

A change in migration flows from a net inflow of 30,000 people in 1974, to the current situation of net outflows has substantially reduced the rate of population increase, which has meant that, in turn, there is a much lower demand for housing. This, combined with government measures to reduce the availability of finance for building in an attempt to restrain inflation, combined further with the effect of inflation in raising the rate of interest on borrowed money, has served to drastically reduce the level of activity in the building industry, so that resources are rapidly becoming underutilised, consequently, skilled building workers are leaving the country in droves, and when the economy, and therefore the building industry, picks up again, there will be a shortage of labour and other resources, which will tend to cause a new round of inflationary impulses.