While parts of the rest of the world are still wallowing in recession, New Zealand in recent months has had a significant number of economic bright spots that could see the country reach “rock star status” within the next four years.
That was the view of ANZ bank chief economist Cameron Bagrie speaking at a post Budget luncheon briefing in Christchurch yesterday.
Here’s a graph sourced with historical figures from statistics (in blue) alongside Treasury’s budget projections (in red), showing our net international investment position, ie our assets as a nation minus our liabilities. (That temporary reduction in borrowing over the last two years is the influx of payments after the Christchurch earthquake.)
Where are New Zealanders borrowing that additional $10 billion a year in perpetuity from? Why, we’re borrowing it from foreign banks just like the one Cameron Bagrie works for, which is, presumably, why he thinks we’re a rock star. If you convert our net international position into a % of our GDP we look even worse. Spain is less indebted than us by this metric and Portugal, Ireland and Greece only slightly more doomed.
Whenever opposition finance spokesmen talk about ‘re-balancing the economy’ they’re really talking about reversing that grim, downwards march into eventual fiscal oblivion and an IMF bail-out. They never get to do that when they’re in power though, because re-balancing towards real wealth creation and the tradables and export sector involves re-balancing away from the finance sector, real estate speculators and other rent-seeking agents, who are too politically powerful to allow such a thing to happen. So we get to stay a ‘rock star’ like Greece and Ireland, ie the kind of rock star that drowns in a bathtub.