Current Account Figures reflect oil dependency, foreign ownership problems

21 Sept 2006

"The huge current account deficit for the June quarter provides a snapshot of some of the structural weaknesses in the New Zealand economy, “ Green Party Co-Leader Russel Norman says.

"This deficit is now $15.2 billion, a $3.1 billion wider gap than at the same time last year, and an alarming 9.7 percent of gross national product.

"Only some of this gap will be self-correcting over the next six months or so. In the year ended June 30, the New Zealand currency fell by 13 per cent. This is already reflected in these current account figures by the surge in our beef and dairy exports, but the downside however is that the sliding NZ dollar makes our oil imports that much more expensive.

"The lesson being - if we want to base our export drive abroad around a low Kiwi dollar, we simultaneously need to have a concerted plan in place at home to reduce our addiction to imported oil. In recent years Sweden and Brazil have had a lot to teach us about how national planning can reduce dependency on oil imports. Those kind of policies policies make sound economic sense, and serve to reduce the effects of climate change at the same time.

"The other striking aspect of these current account figures is the net rise in this quarter’s investment income deficit, driven by a $297 million leap in income earned by foreigners from their investments in New Zealand, only partly offset by the $164 million rise in earnings by Kiwis investing abroad. All too typically, those foreign owned companies mostly chose to pay out their profits in dividends, rather than retain earnings within their New Zealand subsidiaries to use to invest in those businesses.

"This is in part due to the privatisation follies of past National and Labour administrations, that were driven by ideological zeal without regard to the long term consequences for the economy.

“We need a better balance. Laissez-faire economics combined with rising oil prices to create the mess reflected in these current account figures, and they can't get us out of it. If New Zealand can boost its exports of high value goods and services while controlling its appetite for oil imports, we can be double winners. Yet that will require conscious leadership and planning in the energy and transport policy areas."

ENDS

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