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Overseas debt difficulties worsen

Alliance leader Jim Anderton says overseas debt figures released today are very serious, and will mean higher interest rates and fewer jobs.

“The overseas debt is turning into such a deep swamp that any Government is going to have to take strong measures to get it under control, and all parties face the challenge of saying now what they intend to do.

“Total overseas debt is still increasing faster than GDP is growing. The economy is getting deeper and deeper into debt. Corporate debt increased by around $100 million a week last year.

“Public sector debt was only decreased by asset sales, and those asset sales will mean that more profits flow out of the country in the future and make overseas debt worse.

“The total overseas debt has to be repaid, one way or another, by New Zealanders, through higher interest rates, lower wages, lower profits. It will result in less jobs since every dollar that goes out of the country to service debt is a dollar that isn’t invested in New Zealand.”

Jim Anderton ridiculed claims from the Government that the total level of overseas debt doesn’t matter because it doesn’t show the asset backing.

“Ministers making that statement are fully aware that they don’t even have any evidence that the asset backing has grown. It’s like saying to your bank manager ‘don’t worry about all this extra money I’m borrowing, because I’m using it to buy lots of very attractive new household items.’

“The debt is out of control, expanding alarmingly, and the Government doesn’t even recognise the problem, let alone have any idea what to do about it.”

The rise in short-term ‘hot money’ liability was a particular concern identified by the Alliance.

“Some 43% of the total overseas debt falls due within twelve months with most of the increase coming in 90-day debt. That is known as ‘hot money’ and if the owners of it all decide to leave at the same time our economy will be in very serious trouble. This could happen, for example, in response to balance of payments figures due out this Friday, or perhaps even if Max Bradford takes over a Finance portfolio.

“New Zealand’s increasing exposure to ‘hot money’ liability illustrates the loss of sovereignty that has resulted from the National Party creating more and more total overseas debt,” Jim Anderton said.

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