Current account deficit shows need for savings and local investment
The Council of Trade Unions says that a major concern in the current account deficit figures announced today is the continuing trend towards repatriation of profits to foreign owned firms in New Zealand.
Statistics NZ noted today that “the larger investment income deficit was mainly due to an increase in profits earned by foreign-owned New Zealand companies, and higher interest payments made on New Zealand's rising levels of overseas debt.”
CTU Economist Peter Conway said today that many lose sight of the fact that the balances on goods and services are completely overwhelmed by the deficit on investment income.
“In fact, out of the $14.2 billion deficit on the current account, $12.4 billion (87 per cent) is from the investment income deficit.”
“This reflects increased debt due to bank borrowing to fund high debt in the housing market as house prices have surged and interest rates have gone up, along with a continued stream of profits and capital repayments accruing to foreign-owned firms based in New Zealand.”
Peter Conway said this shows the need for KiwiSaver and other savings to flow through to investment by New Zealanders in our economy so that profits remain here rather than leaving our shores to such a great extent.
The CTU would also like to see more joint ventures so that a higher proportion of profits accrue to New Zealand firms.
In addition the CTU has argued for a number of measures to improve the affordability of home ownership and reduce the debt burden on householders, Peter Conway said.