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Current Account Deficit Mounting

Media Release 21 September 2005

Current Account Deficit Mounting

The steady rise in our current account deficit since early 2001 to $11.9 billion for the June 2005 year will inevitably put pressure on the New Zealand dollar”, according to Alasdair Thompson, Chief Executive of the Employers & Manufacturers Association (Northern).

“The New Zealand dollar will fall when foreign investors decide the risk of that happening is getting too close for comfort. They will cash up and leave.

“The New Zealand dollar will fall, leading to imports, including oil, getting dearer, sparking a peak in price inflation and higher interest rates.

“In short, a very high current account deficit and a high New Zealand dollar are incompatible”, concluded Mr Thompson.

ENDS

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