Export-led recovery needed now

One of New Zealand's risk areas is its 40 year habit of borrowing to sustain the lifestyle we have become accustomed to. Since 1973 NZ has run ongoing current account deficits - that is we have been paying out more for imports and debt servicing then we have been earning from exports each year. The end result is that on a per capita basis NZ Inc (public and private sectors) now owes almost as much as the basket case economies of Greece, Spain and Ireland. Contributing factors were: the oil price shocks of 1973 and 1979; the UK's entry into the EU and the loss of traditional trading markets; and poor policy decisions here at home.

To get out from this hole NZ needs to change a few things:
1. Stop digging a deeper hole - stop borrowing so much overseas - earn more from selling high value products in overseas markets.
2. Invest more in research & development - especially into high value products for the export market.
3. Ensure we have an efficient and well-maintained infrastructure - transport, broadband communications, and financial services.
4. Make it easier for overseas investors to live and do business in NZ - including joint ventures, PPPs, and high-value exports where the economic benefits flow back to the national economy.
5. Provide policy settings than encourage kiwis to work or start their own businesses - rather than rely on welfare, promote education and training for 21st century living and working; encourage savings and investment rather than consumption and spending.
6. Encourage kiwis to look outwards to the global economy for their incomes - while living in NZ and building a strong sense of national identity and of place here in Aotearoa New Zealand.
7. Promote equal opportunities - regardless of class, gender or race. Break the long tail of underachievement and ensure that all kiwis have the chance to be part of the economic, educational and social mainstream of Aotearoa NZ.
8. Keep our clean green environment in good shape for future generations.

If any politicians out there want to pick up this recipe - feel free. Oh- one other thing - NZ should be setting a course and sticking with it - we need to avoid these lurches to the right and the left - especially on matter such as employment law, superannuation and compulsory saving. A good piece of bi-partisanship would be very helpful to our long term future. Both major parties know superannuation needs to be made affordable and the age probably needs raising. Why not agree on a few principles that the main parties will work within?  I think the public are ready - provided there is plenty of notice and no one has the rug pulled out from under them.

Time is right for compulsory super savings

DPF over at Kiwiblog remains opposed to compulsory super because he is concerned that politicians of one stripe or another will eventually be tempted to spend the money on a pet project - rather than on funding citizens' retirement.  What he overlooks, however, is that we already have a risky arrangement in place.  It is called income tax and national superannuation. A new compulsory savings scheme should tag all funds for funding citizens' retirement and should be in the name of specific individuals.  It should not be accessible for spending by government - unlike the present tax & spend arrangement.

The main benefit of a compulsory retirement savings scheme would be reduce New Zealand's dependence on overseas savings and capital for investment.  The consequence of decades of borrowings - largely to fund housing - has been to increase the per capita debt of NZ towards to Icelandic proportions.  A sovereign state cannot continue with such an approach without either the receivers one day being called in -  in the form of the IMF in the case of countries -  or dramatic reductions in citizens' living standards. Neither prospect is something New Zealanders can be blase about.  Here's hoping the government has the courage to move to a compulsory retirement savings scheme - with safeguards to keep politicians away from our nesteggs.

The World's Biggest Debtor Nations - CNBC

The World's Biggest Debtor Nations - CNBC
So much for the Irish miracle. Ireland - the growth tiger of the 1980s and 90s is now at risk of becoming Europe's pauper.  Coming in with an external debt of around $2.39 trillion (2009 Q3) and total 2009 GDP (est): $177.3 billion Ireland's external debt (as % of GDP): = 1,352% Gross external debt. It is now the world's biggest debtor nation in terms of external debt to GDP.

New Zealand (even with its large household debt levels does not feature in the top 20 biggest debtor nations). The efforts of Messrs Birch and Cullen in salting away some surpluses and repaying government debt have all help reduce New Zealand's level of gross external debt.

It will be the debt of us

You cannot spend your way to prosperity. That's a basic economics lesson that most people learned at a young age. Today, however, we have a generation of bankers and politicians who appear to believe that they can borrow their way to boom times and spend their way to success. It simply ain't so. Once the debt-fuelled binge is over the bill will have to be paid. It would be better to pay as we go now than face the prospect of harsh cutbacks later. Ongoing current account deficits have now been joined by a return to government borrowings for operating expenses. In other words we are borrowing to pay the groceries - something New Zealand finally stopped doing in the 1990s. Are we now poised to return to bad habits?