asked the Minister for Finance whether in view of the fact that the figures supplied by him in reply to Question No. 24 on Wednesday 5th November last show that if the adverse merchandise trade balance remained at the same level in the last quarter of this year as in the last quarter of 1968, the current external deficit for the calendar year would be between £54 and £57 million, he will indicate the grounds on which he expects the rapid deterioration in the adverse trade balance to come to a halt in the final quarter of this year, as is implicit in his projection of a £55 million current external deficit for the calendar year.
Ceisteanna—Questions. Oral Answers. - Visible Trade Balance.
43.
The rate of increase in the visible trade balance has slowed down in recent months. In August and September, the average increase was £2¾million, compared with an average of over£6 million in the preceding seven months. It is not unreasonable to expect that, subject to unforeseen contingencies, there will be a further improvement in the trend of external trade in the remaining months of the year particularly as the import excess was exceptionally high in the last quarter of 1968.
The prospect of a better trend in external trade in the last quarter of the year does not give any ground for complacency. Whether the improvement will continue or whether it represents a lull before a further deterioration will depend largely on the trend of incomes in the coming months. As I have indicated on a number of occasions recently, balance of payments deficits of the size expected this year are not sustainable for long without seriously depleting our external reserves.
Does the Minister expect the adverse trade balance in the final quarter to be no greater than last year?
Perhaps less.
That augurs well for the economy.
If it happens.
The economy is doing well. We have problems associated with expansion and development. When you have an expanding economy you have problems. When you have an economy going down, you have problems. Our problems at the moment are associated, thank God, with expansion and development.
Could it be inferred from the Minister's reply that there is no need for restrictive or other stringent measures?
I did not say that. What I said, and it is important that we should be clear about this, was that at the time of the Budget last year we gave an estimate of what the balance of payments deficit this year was likely to be. We said it was likely to be£55 million and we went on to say that this was a very large deficit and one we could not look forward to having every year. We were prepared, however, in the light of all the circumstances, to tolerate a deficit of that size this year but we would not look forward to having a deficit of that size as a matter of course over a period of years. All I am saying at the moment is that the signs are that the estimate we made last March of£55 million will turn out to be accurate and there will be an improvement in the last quarter of this year compared with the last quarter of last year. However, we can only wait and see what the long-term indications of that improvement are. It may be temporary. In the early months of next year the balance of payments trend may deteriorate again. It will depend very much on how the present round of negotiations for pay increases proceeds.
When the Minister stated that his forecasts were pretty accurate, and they seem to be accurate, would it not imply that he had restrictive measures in mind early in the year? If his forecasts were accurate obviously there would be no need for restrictive measures at present.
Not exactly.
The Minister said—
(Interruptions).
Question No. 44.
Did I understand that the Minister was answering question No. 44?
No.43.
The Minister mentioned incomes and more or less gave a warning on incomes. I assume that he would also like to include prices—
Oh yes.
——and profits.
Prices and incomes are two sides of the same coin.
The Minister just mentioned incomes.
I meant prices and incomes.