have taken action to limit the expansion of credit in the economy.
They have also taken steps to restrict the rate of growth in Government
expenditure in the coming financial year.

In existing world conditions my Government recognises that measures
of fiscal and monetary policy will not be sufficient to halt the wage-
price spiral and that more direct action is now required. To restrain
prices a price freeze was introduced and this has been followed by a
scheme of price justification. Measures are now proposed to stabilise
wage rates. My Government has placed the highest priority on
employers and employees agreeing voluntarily to a programme which
would ensure greater economic stability in the current year. My
Ministers have consulted at some length with both parties to facilitate
an agreement. Substantial progress was made in these consultations
but my Government has concluded that the situation requires further
action. Legislation will therefore be introduced early in the Session
to give effect to the stabilisation measures already announced by my
Minister of Labour. The objective of these measures is to limit
increases in remuneration on average to less than 7 percent in the
year from 1 January 1971. It is my Government’s hope that employers
and employees will be able to reach agreement on new rates of
remuneration within this guideline. In respect of increases in excess
of the guideline the parties will be expected to apply to a Remuneration
Authority. The proposed legislation will include provisions which
would make it an offence to increase remuneration above 7 percent,
or such other percentage as may be fixed from time to time by
Order in Council, except in defined special circumstances or with
the approval of the Remuneration Authority. These latter provisions
would be brought into force only if it became clear that my
Government’s stabilisation objectives would not be achieved by
voluntary acceptance of the approved guideline.

It is the view of my Ministers that this legislation is necessary to deal
with the exceptional situation that prevails. It is their intention to
keep the legislation under review in the light of changing circum-
stances.

My Government intends to apply the principles of the legislation to
the State Services and is discussing their application with the State
Service staff organisations.

Honourable Members, throughout the past year New Zealand’s
foreign exchange resources have been maintained at satisfactory levels.
The current account of overseas transactions for the last 12 months
has recorded a deficit but this has been more than offset by an inflow
of private capital. The terms of trade have continued to deteriorate
as, overall, the prices of New Zealand’s main exports have remained
stable whilst prices for imports have continued to rise relatively
quickly. Leaving aside the special situation that existed during the
Second World War the terms of trade are at their lowest level since
the world depression of the thirties.

My Ministers believe that this deterioration in the terms of trade is a
direct result of the failure of the nations of the world to abide by
accepted principles of international trade especially those embodied
in the General Agreement on Tariffs and Trade. While trade in
industrial products is conducted relatively freely, international trade
in agricultural products is subject to barriers and restrictions which
unfairly impede the economic development of those countries
dependent on the export of primary products. My Government will
continue to place emphasis on bilateral and multilateral negotiations
aimed at eliminating these barriers and on moves to widen inter-
national arrangements for the orderly marketing of primary products.