ECONOMIST URGES MORE TAXES TO LOWER N.Z. DOLLAR
An income tax surcharge and capital
gains tax could bring about an urgently needed depreciation of
the N.Z. Dollar, independent economist Len Bayliss said.
    Bayliss, a former economist with the Reserve Bank and the
Bank of New Zealand, said a major depreciation is needed to
restore export competitiveness even if inflation is cut by
current government policies.
    The taxes would help cut the budget deficit, which in turn
would lower the value of the N.Z. Dollar, he said in a speech.
He added that the deficit for the year ending March 1988 could
be much higher than the government's 1.3 billion dlr forecast.
    Since the government was unlikely to cut expenditure as a
percentage of gross domestic product, a major tax increase was
probably unavoidable, Bayliss said.
    He would have preferred an increase in the 10 pct
value-added goods and services tax, introduced in October 1986,
but that would have had a short-term inflationary impact.
Import tariffs should be lowered to minimise the inflationary
impact of a currency depreciation.
    The government had failed to bring inflation down despite
lower oil prices and an appreciation in the currency, he added.
    New Zealand's inflation rate was 16.9 pct in the year to
end-September against 18.9 pct in the year to end June.
    The major deficiency in the government's anti-inflation
policies was reliance on high interest and exchange rates and
insufficient emphasis on reducing the budget deficit, Bayliss
said. The government had also failed to reduce overseas debt
and debt ratios and cut the balance of payments deficit.
    "The widespread belief that (New Zealand's) problems are
going to take much longer to solve than was originally thought
is soundly based -- primarily because the government's
macro-economic policies have been unsuccessful," Bayliss said.
 REUTER
