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HARD NEWS - The Money or the Bodybag?

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GOOD DAY MEDIAPHILES ... It's In the Bag, Top Town, Lotto - and now, another great Kiwi game - What Will That Dollar Do?

Yes, in the words of the singer from Shihad's uncle, what'll it be, customers? The Money or the Bodybag? Around about lunchtime yesterday it was looking distinctly like the latter, as unexpectedly poor trade figures arrived on the heels of an overnight sell-off of the Kiwi dollar.

Everything went south very suddenly - the dollar, the stock market and the prospect of a happy Christmas. Somewhere, a ghostly alarm went "Whoop! Whoop! Pull up!" and, gradually, we did. Back nearly a cent to 43.5 against the greenback and nudging 50 on the TWI. Phew. It wasn't so much the drop as the angle of the descent.

As the almighty American economy sucks in the world's available capital, we've hardly been alone in this. The euro was only just off its all-time low and the Aussie dollar is taking nearly as big a hammering as ours is.

But we're copping it just a little bit worse than either of them for the fairly straightforward reason that our external position is worse than anybody else's. Our current account deficit - money in, money out - runs at 8% of GDP. We import more than we export and we have a tremendous amount of foreign debt.

This didn't happen over the past nine months, but the past nine years. And, assuming it doesn't get any worse, it'll take two or three years to get much better. For now, global market sentiment is against us. There's something bleakly humorous about something so cold and mechanical having sentiment, but there you have it.

In the meantime, the Prime Minister, her Deputy and the Minister of Finance have all done a reasonable job of being publicly composed and pointing out that the sell-off was overdone - although Cullen blew it a bit by declaring New Zealand to be far from a "banana republic".

Indeed we are not - a number of elements of our economy are in fairly rude health - but even prefaced with the word "not", the phrase "banana republic" sounds a bit iffy coming from the lips of a finance minister.

It is all the current government's fault? No. Even if you accept that bringing our industrial relations law in line with the rest of the developed world has spooked the horses, that's but a blip compared to the very large structural problems that developed under the brilliant money managers of the National Party.

It's hardly the government's fault either that foreign investors can't find anything here they want to invest in. The great wooden god of the NZSE, Telecom, spent the 90s not investing in itself. It let its capital spending fall below the rate of depreciation while it pumped out huge dividends to its shareholders. Now it has trouble making its new image as a growth company stick.

You and I didn't invest much either - at least not on anything productive. We blew a lot on a pointless property boom, borrowing foreign money to fund the spiral. Every time we got a tax cut we ran off and bought imports with it. That was pretty easy to do, of course, when the Reserve Bank was propping the dollar up around 70 cents US. We didn't save and we still don't.

We certainly didn't put enough of our own money into the New Zealand Stock Exchange. Bungled privatisations andsome of the worst protections for small investors in the developed world put paid to that.

But after all that, it's not that bad. Every cent we drop against the US dollar is another $100 million on the value of dairy exports. More expensive imports will hurt a bit, but will help wean us off our spending habits and might even let local producers build capacity. This all arriving at the same time as an inflationary mini-oil crisis is deuced bad luck, but the Reserve Bank isn't likely to wield such a big interest rate stick as it has in the past.

Yesterday's trade blip notwithstanding, commodity exports are booming, and so is tourism. After all the effing and blinding, 70% of business are paying less back with ACC than they were with private insurance companies - and ACC is $800 million in surplus!

Behind the organised chorus of whingeing there's actually been quite a lot going on domestically - from the ballsy purchase of Ansett New Zealand by Alan Gibbs and his chums to less tangible indicators: it doesn't appear on any index, but there's more to do and much more of a buzz in Auckland than there was this time last year. That does actually matter.

We also need to remind ourselves that things aren't always as they seem. At the bottom of the rampaging American economy are a bunch of people being treated like so much hamburger. Nearly a quarter of the millions of homeless people in American cities are actually employed - their wages just don't allow for the simple dignity of a roof over their heads. Forty percent of America's homeless population is now composed of families with children. I could go on ...

But I won't. I will, instead, urge you to buy a number of non-imported items which are arguably a bigger bargain today than they were last week. Loose, Loop and Remix magazines. Chad Taylor's Shirker. The Concord Dawn album and the Subtronix compilation - can we do D&B here or what? - and the work of quiet genius that is Robert Scott's The Creeping Unknown. Try that for a bit of a post-club comedown surprise.

And can things be so bad when Pitch Black - whose album you should buy and whose concerts you owe it to yourself to attend - are going to work with a thoroughly rejuvenated Sam Hunt? Well, actually, Sam told John Campbell about it before he told Pitch Black, but Mike Hodgson has assured me they're highly compatible with old stoners. Lovely - G'bye!

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