March 20, 2013

NZ's debt to rest of world grows

Net foreign liabilities - a measure of what New Zealand owes the rest of the
 world - rose to $150 billion or 71.7% of GDP in the year according to a Radio NZ report

For a small economy, distant from world markets and reliant so heavily on one export sector this news should be cause for concern.  We need a coherent strategy to develop at least two other major export sectors.  ICT looks as if it could grow into one of those.  Either way an economy owing so much to offshore financiers will remain vulnerable to external shocks until it has a plan to diminish that vulnerability and then executes against that plan.

One element towards a comprehensive solution is that the government must get back to surplus at the earliest opportunity.  But wouldn't it also be smart to look to the private sector savings levels and reduction of household debt to contribute to this overseas-debt reduction cause?

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