an
tlegar News _ Febrvory 1.1999

New Zealanders fi

Editor's note—Since New Zealand's Labor party
took power I ~1984 Tt has pursued a War against
inflation. The result has been soaring unemployment
and high interest rates. Though the hard times may be
easing, many New 7 complain the ent
has been too harsh.
By JIM SHEPPARD
CLEVEDON, N.Z. (CP)

weather-beaten face have an

The worry lines crossing
Neil Montgomerie’s
ominous pattern these days.

in New
king ends meet

“Sheep farmers aren't smiling any more
Zealand. The wife and 1 arc
Haven't been for years.

He speaks in that laconic

facing trouble that:is common to farmers around the

not ma
matter-of-fact way of

world
There are deep wells oF sadness in his eves as he
looks over the rolling, verdant hills of his Pukeawa
Farm near this tiny town about SO kilometres south of
Auckland, a booming business centre on New Zealand's
North Island. The name of Montgomerie's farm is a
Maori word meaning Hills by the River
We're going to have to sell some of the land,"* he
says finally with a shrug. “Fought against it for years
But there's no other way
PM GETS TOUGH
Sad as it is, Montgomerie’s tale is

these days as the Labor government of. Prime Ministe#

commonplace

David Lange pursues tough anti-inflation - policies ‘that
compared with- the worst _excessesagh
Thatcherism in Britain

many have

The experts agree Lange's government was con
fronted with a mess when it took power in 1984.

Inflation was running at more than 18 per cent. The
country was deeply in debt to the outside world
Industry and agriculture had wandered far from
economic sense_behind. a wall of tariffs and import
restrictions, coupled with high subsidies and tax breaks

New Zealand's aiitomobile industty, for example
was protected from overseas competititon and highly
inefficient It was producing 100 different models for an
annual market of only 70,000 sales

GOVERNMENT ACTS

Faced with such sweeping problems, Lange ‘and his
government acted. forcefully

The New Zealand dollar was imediately devalued
by about 20 per cent, To maintain the dollar at its new
level while exchange controls were abolished, high
interest rates were introduced

Price controls were eliminated, as were most farm
subsidies and industrial incentives. Export incentives
were dropped and New Zealand's tough system of
import controls phased out

Government spending was*:slashed. One-third of
the country’s post offices were closed almost overnight
Crown corporations were offered for sale to the private
sector

The drastic policies were unabashedly stolen from
the economic revolution attempted in Britain by Prime
Minister Margaret’ Thatcher

And they had similar results.

Inflation has fallen to between four ahd five per
cent annually. And &fter what the government had
always said would be years of ‘hurt and pain,’’ most
economic indicators have lately been on the rise
ge sacked Finance Minister Roger Douglas

fter a bitter battle over the pace of reform and
The move prompted a cabinet split that
many observers wondering whether Lange

recently
lation.

ntain power in face of an Open party revplt

One of the few successes for the small New Zealand
ecohomy has been freer trade with Australia, its much
bigger Known as the CER. (for. Closer
Economic arrangement Was signed

neighbor
Relationship) the

almost six years ago.

Experts agree that New Zealand exporters and
manufacturers have seized opportunities offered by
increased access to a market of nearly
Australians

17 million

they say, has created oF preserved jobs in
nd ata time of rising unemployment

UNEMPLOYMENT UP
Unemployment last fall hit 150,000; or 11.3 per eent
of the workforce the worst level since the Great
Depression of the 1930s
Thousands of workers have been forced from

Editor's note—Feisty New Zealand has angered
its allies, especially the United States and Australia,
with its loud and firm anti-nuclear policies Though
the measures may seem radical to Europeans and
North Americans, the government's policies are
widely supported at home

By JIM SHEPPARD

WELLINGTON (CP) — From London's White
hall to Ottawa's Lester B, Pearson Building, the
corridors of diplomacy have rtain-familiarity to
them

Normally pristine and whitewashed, they are the
scene of hushed conversations about great matters of
state, worried consultations about dinner protocol,
and occasional crises that send everyone galloping
about in uhdiplomatic haste
Zealand's Foreigh
with its.fiery red-on-black posters

PeriMps that's why New

Affairs Ministry

stands ott so vividly,
But then again, there's little that is conventional

Greenpeace banners

or familiar about the. foreign policy of this tiny
two-island country these days
ALLIES UNHAPPY

Its vehement anti-nuclear stance has caused a
rift with the United States and seriously undermined
relations with Australia, its closest ally over the
years and nearest neighbor

New Zealand is still engaged in a running battle
with France over the sinking by French secret agents
of the Greenpeace ship Rainbow Warrior, which had
planned a voyage to protest French nuclear testing in
the Pacific

It praises the Chinese for signing a pact to make
the South Pacific a nuclear-free zone and criticizes
the British for refusing to do the same

It blasts the

Japanese. for dumping nuclear

Anti-nuclear policies
widely accepted at home

of exploding nuclear bombs and- brightly hued

wastes in the ocean and says there’s little danger in
the Soviet Union’ s, increased military and economic
interest in the region .
POLICY POPULAR

While these policies may seem far to the left of
the political centre in North American or European
terms, there is little doubt they are Highly popular
here

The respected London-based International Insti
tute for Strategic Studies lamented in a recent report
that the so-called ANZUS treaty, regarding military
co-operation between Australia, New and and
the United States, ‘has now (for. all practical
purposes) ceased to exist

But it noted that a recent, study found 73 per
cent of New Zealanders. ‘want their (country’s)
defence to be managed in a way which-ensires that
New Zealand is nuclear-free.”
~The widely accepted basis for the anti-nuclear
policy—can—be—summed up~ best by the central
conclusion of a 1987 New Zealand parliamentary
committee report

After extensivé hearings on the subject, the
committee said New Zealand “faces no threat of
invasion or external attack. And no such threat is
foreseen in the next decade.”

There's a better chance that some country
seeking temporary
might launch a quick air or sea raid, it said

But it's difficult to imagine,”’ the report added
with just the right touch of Kiwi insousiance and
matter-of-factness
land might be of sufficient important to prompt
hostile actions of this type

Prime Minister David Lange says he doesn't
even want New Zealand defended by others if they

political or trade concessions

“‘what concessions by New Zea.

are using nuclear weapons

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inflation

full-time to part-time jobs. Others have made major
concessions on wages or working conditions

Opposition leader Jim Bolger says high unemploy
ment is devastating New Zealand

“It kills,’” he said bluntly in an interview, Bolger
cited a study by the New Zealand Mental Health
Foundation which predicts a three- to five-per-cent rise
in suicides for every one-percentage-point increase in
unemployment

“This government just doesn't seem to care" about
the damage done by its policies, says Wally Gardner
director general of the New Zealand's, Manufacturers
Federation. ‘It has-no industrial strategy whatsoever.”

SEEK DISCIPLINE

Jock Phillips, a New Zealand historian, thinks the
government finds some advantage in high ~unemptoy:
ment

“The people who set up the welfare state 50 years
ago knew what it’ was like to be hungry and were
determined not to go through that ever again

*(But) most members. of this government, grew up
with security and a degree of affluence

“They think that too much security has made us fat
and lazy. Ih their eyes, a bitsof unemployment is
actually good because it instils a bit of discipline.’

If that is so, the “bit of discipline” seems a trifle
harsh to John Williams, one of the thousands of
unemployed criss-crossing ‘the country~on aging Neve
Zealand Railways buses, looking forlornly for a job

HOPE FADING

‘I’ve been looking for a job for so Jong now, I can't
rémember what it’s like to work.’’ the 24-year-old
former postal clerk says bitterly. He stares out the
window at endless tows of yellow and purple gorse
fighting with gnarled old tree roots for space amid the
tumbled masses of grey rock.

Williams, who grew up in the small town of Inver
cargill on the southern tip’ of New Zealand's South
Island — the bigger but less populated of the country’s
two main islands — has been unemployed for 18 months
since government cut-backs took his job away

“Fve-always-been too proud to beg.
s plunges down from the hills to skirt

Williams
says as the’ old t
the rocks along the coastline of Cook Strait

‘But now, I'm aot so sure. I'd do just about
anything to get out of this trap

FARMER CHANGES

It’s a similar story-up north at the MOntgomerie
farm

Neil and his wife, Christine, say they now make far
more money by catering to Japanese and western
tourists than from farming. The visitors want to holiday
on a farm where they can ride horses or watch sheep
being sheared

But catering to the whims of up to 50 or 60 city
slickers per day seriously interferes with running the
300-hectare Montgomerie establishment with its 1,200
sheep. 400 cattle, 200 angora goats and’30 horses.

Still," says Montgomerie philosophically, ‘*all you

can do in this life-is work hard ind hope for the best."

Good Business
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Maoris
experience
revival

Editor's note: New Zealand's Mao-
ris have recently won battles over the

control of land, fishing and fores-
tries. The victories are part of the

Maori cultural and political revival,
but some people warn of a white

BUSINESS

February 1,1999 CastlegarNews °%

Growth slowdown on

By ERIC BEAUCHESNE
OTTAWA (CP) — The Canadian
economy continued to expand in No-
vember, but just barely — a sign that
the long-expected slowdown in
growth is under way.

But don't expect any ing of
interest rates yet, analysts advise, said.

They say borrowing costs will prob-
ably remain at current levels,
rise somewhat, until there is clear
evidence of an easing of inflation
Gross domestic product, the total
value of ‘production in the “country, pact
rose 0.1 per cent in November, the
same as in October, Statistics Canada

Monthly GDP growth has been er:
or may atic this year but has weakened.
since a 0.5-per-cent increase in Aug
ust, suggesting the Bank of Canada's
interest-rate policy is having an im

Bank governor John Crow has
been pushing up interest-rates- to
slow economic growth and ease what

RSP most reliable

By SUSAN YELLIN
The Canadian Pret

Sure things are rare in the world of money, but a
registered retirement savings plan is the most reliable
tax-saver available in Canada, personal finance experts
say

“RRSPs are without a doubt the single best
investment anyone can make,"’ says Gordon Pape,
author of Building Wealth: Achieving Your Financial
Goals.

Besides being a good way to save money for
retirement, the plans offer a double tax advantage
when money is’ put into the plan, it produces an
almost-immediate tax break; and the money is sheltered
from tax as it grows.

Only when money is withdrawn from an RRSP are
taxes paid, but this normally occurs at retirement when
annual earnings usually are lower and the tax rate is
reduced.

“The immediate tax refund is nice but it’s not the
big payoff — it’s the long-term tax-free compounding
within the plan," says Pape

Pape even suggests borrowing money to ensure you
make the maximum allowed contribution to the plan
each year. Any tax refund should then go toward
paying\off the loan as quickly as possible, he advises

* RULES UNCHANGED

There are no new tules governing the ceilings on
RRSPs for the 1988 tax yeare. The federal government
had planned to increase the limits, but then decided to
stick with the existing ones at least for the time being

So the ceiling remains 20 per cent of gross income
to a maximum of $7,500.

However, that ceiling falls if you belong to 4
where your contributions are
matched by your firm. In that case, the top level is
$3,500 minus your contributions to the pension plan or
20 per cent of earned income, whichever is Tess

But Ottawa has changed another rule that could
affect RRSP planning..No longer is a person's first
$1,000 in investment income free of tax

People who have stashed away savings in a bank
account, guaranteed investment certificate or Canada
Savings Bond and then deposited them into RRSPs at
the last minute will now have to pay taxes on the
interest from those investments, warns William Mc
Leod, author of Tax Shelters: Choose with Care.

“~ The federal goyernment will RRSP
deposits made as late as March I this year to apply to
the 1988 taxation year

Anyone who has an interest-earning investment
should consider putting it into an RRSP immediately

company pension plan

allow any

FINANCIAL SERVICES

More competition

OTTAWA (CP) Financial ser

flict-oftinterest rules.

and not wait for the deadline, says McLeod.

“if you were to put that money into an RRSP
account as you earned it, it would be totally protected
from taxation,’ McLeod says.

“The implication of losing the $1,000 of tax:free
investment income: really hasn't dawned on people
yet

McLeod also warns investors to be careful where
their RRSP dollars go for investment

Banks, other financial institutions and investment
companies that sell RRSPs can place the money in
everything from mutual funds\to mortgages, with
different plans giving different rates depending on the
amount of risk involved

But stock-based mutual funds provide dividends
and capital gains and should be invested in. something
other than an RRSP, McLeod sys

“That's because when you put mutual funds that
are invested in common stock inside an RRSP, you lose
thé préferential treatment accorded to dividends and
you lose the preferential treatment accorded to capital
gains;’’ he says

TAKE ALL BREAKS

The idea is to take-advantage of tax breaks offered
outside RRSPs, and put any money that isn't otherwise
tax-sheltered into RRSPs.

Investors should remember that Canadians have «
lifetime capital gains tax exemption of $100,000, but-a
stock-based investment inside an RRSP is not included,
he says

‘I'm not saying mutual funds shouldn't be used for
RRSPs, but they shouldn't be used if people have
ipterest-bearing investments outside,"” McLeod says.

If you've conscientiously been putting money into
an RRSP every year for some time, it's also important to
keép in mind that deposit insurance protection only goes
as high as $60,000 on the combined  principal_and
interest, Pape says

Make sure your money is spread around, Pape
says, so it doesn’t go over the deposit protection limit in
any one financial institution

RRSPs are also one of the last bastions of a tax-sav
ing strategy known as income ‘splitting. Ottawa has
eliminated most such strategies, but the highest-paid
member of the family can still transfer all or a portion of
his or her RRSP annual contributions into an RRSP for
the spouse

Instead of getting one person with an RRSP
income (when funds are withdrawn) of say, $30,000 a
year, you get two people with an RRSP income of
$15,000 a year each, which will be taxed at a lower rate
than the person getting $30,000,** Pape says

he argues is upward. pressure on

prices.

George Saba, an economist with
Montreal Trust, said Canadians
should not expect Crow to allow
interest rates to decline until the
slowdown in economic growth is mat
ched-by signs of w drop in inflation

INFLATION-SHY

“John Crow is not going to be im
pressed simply by this number,
Saba said. ‘*What he wants to see
over the course’ of the next two or
three months is that the inflation
number is also reflecting that slow
down

“What-he's-trying-to-do-is slow the
economy without putting it into a re
cession, which in turn. will have a
favorable effect on inflation:’

Inflation, as measured by the
year-on-year change in consumer pri
ces, was four per cent in December
down slightly from the previous three
months.

Interest rates will start to fall by
the middle of the year or maybe even
a little sooner, but I don't think_this
one-month number will be enough to
do it,"’ said Sherry Atkinson-Cooper;
an-economist with investment broker
Burns Fry

“The Canadian numbers seem to
be pointing to a moderate slow
down,” she said. ‘‘I think it's what
we want

“I don't think that it’s overdone, at
least not yet,|' she said. ‘*But-there's
no question that (Crow) must be very
cautious.”

CROW SKEPTICAL

Last week Crow said that while
inflationary pressures may have been
contained, they haven't eased. And
he made it clear that a further drop
in inflation is needed before there
will be any interest-rate relief

The latest Statistics Canada GDP
figures show a strong resale housing
market and a jump; in
trade, offsetting steep declines in
auto production, oil drilling and-el
ectricity output

Much of the strength in the hous.
ing market was in Ontario and British
Columbia
trade followed declines in each of the

The increase in wholesale

previous two months

Slack world oil prices were behind
the continuing decline in oil and gas
drilling. The drop in auto production
reflected weakening demand for cars
in the United States, while low water
levels, especially in the Quebec, de
pressed production of electrical
power to its lowest level of 1988.

— WANTED —

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Castlégar News

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PERFECT FIT

backlash.
By JIM SHEPPARD
AUCKLAND (CP) The heavily
laden through the
rolling waves at ‘the entrance to the
harbor of this

freighter cuts

bustling port and
booming business centre

Its deep-throated horn
three times off the whar

echoes
once, twice
ves, factories. highrise office towers
and endless rows of suburban homes
that line the rocky points of land
along blue-green,Orakei Bay

For a moment,| there's no answer

Then, with a deliberate shake of its
thick head as the ship passes hun
treds-of-metres-beneath her. a cow

vices have become more competitive
under the policy of deregulation but
there afé still major issues to resotve
says a report by the Conference
Board of Canada

The structure of Canada’s financial
industry has changed dramatically
because of a series of decisions at
both levels of government, the report
says. Now, the banks can own
brokerage firms, and-insurance and
trust companies are being forged into
financial conglomerates often owned
by non-financial companies.

Before the strict rules governing
financial services were relaxed, each
financial institution was restricted to

dards and levels of capital adequacy
to protect institutions and their de
poitors

The federal government introduced
draft legislation last year outlining its
approach to some of these issues

Currently, an impending bid by
credit card ¢ompany American Ex
foreign bank in
Canada is focusing attention on the
question of ownership

“Continued efforts are needed-to
better harmonize the approaches of
federal and provincial governments
and their supervisory bodies to a
broad range of issues,"’ the report
States,

press to open a

fa core business and cross-ownership The pressures of technological
was not permitted change and domestic and interna
But this changing structure and tional competition will continue to
the move to global financial markets — erode the distinctions between the
Try a classified ad in during the past decade present op- different elements of the financial
portunities for the financial services setvices industry, the Conference

industry and continuing challenges Board said

of cattle grazing for governments, the board's report

WHITEHORSE | treirnis°"* "Ss sad The Conerence pews 1 RUBBER STAMPS
vate economic research group.

CASTLEGAR NEWS

WINFIELD But then, New Zealanders have TIONS REMAIN
see great many changes in race relations 197 Columbia Avenu:
have a full line of RRSPs designed to make

recently be forced to ea
recently been forced to deal with a The board said the main questions
and 87 more BC between whites and native Maoris dominating the debate include _ow-- Phone 365-7266 0 ;
All for just In the case of Bastion’s Point. the each of our members look like a million! LOANS & __
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