Current account: Credit downgrade inevitable
Current account deficit: Credit downgrade inevitable
Jim Anderton MP Thu Sep 23 1999
New Zealand's credit rating will inevitably be downgraded regardless of the outcome of the election, Alliance leader Jim Anderton said today following the release of figures showing a sharp deterioration in New Zealand's overseas deficit.
New Zealand spent $6,292 million more than we earned in the year to the end of June. The deficit amounts to 6.3% of everything the economy produced last year, compared to 5.8% in the year to March and 4.9% in the year to June 1998. It's New Zealand's worst current account deficit since 1986 (if the 1997 purchase of Te Kaha is excluded).
Statistics New Zealand targets foreign investment as 'a significant factor in the current account deficit.' Overseas investors made $1,719 million from New Zealand in the three months to June, while New Zealand investments overseas lost $170 million.
Jim Anderton says New Zealand's current account deficit is serious and chronic.
'New Zealand's credit rating will inevitably be downgraded because we are not paying our way in the world. The down-grade will mean higher interest rates for all New Zealanders.
'The deficit highlights the way our export sector has been damaged. Exports are traditionally at their highest at this time of year and yet New Zealand has recorded unusually poor export results coupled with a sharp rise in imports.
'Lower exports of primary products such as dairy, wool, casein and meat were the main factor in declining export earnings. That shows the disastrous and sustained impact the government's economic management and monetary policies have had on our main export earners. It also emphasises the need for incentives to establish new-technology export industries to reduce our reliance on the commodities sector.
'The challenge to other parties is to state how they intend to bring the economy back into balance without allowing the balance of payments deficit to cause a recession. The Alliance is recommending a 5% tariff increase on all imports other than from Australia,' Jim Anderton said.