RT @JoshBBornstein: 65 year study confirms my research: Tax cuts don't lead to economic growth. Ping @Nick_Xenophon , @BCAcomau https://t.…
19/08/2017 9:13 PM
RT @attn: .@Schwarzenegger has a blunt message for Nazis. https://t.co/HAbnejahtl
18/08/2017 9:38 PM
RT @PositiveMoneyUK: Make Monetary Policy Fair: It's time to explore alternatives to 'conventional' QE. https://t.co/m6CFVojm7w #QEforPeopl…
18/08/2017 9:35 PM
@deirdrekent To be expected when income is taxed and capital gain not...
16/08/2017 9:22 PM
@bernardchickey @YourHomeLoanNZ Add ring fencing loses / deal to negative gearing and we might see some balance develop in the economy.
16/08/2017 7:36 PM
@bernardchickey Or take the job and do the right thing anyway - the RBNZ is "independent" after all...
16/08/2017 7:34 PM
@bernardchickey Not take the job because you would know you would be on a hiding to nothing. The link between earn… https://t.co/nxPRuAaT6t
16/08/2017 7:31 PM
RT @theyearofelan: Sure, the cancer was aggressive. But the chemotherapy was also very aggressive. There was aggression on both sides
16/08/2017 7:27 PM
@bernardchickey DTI+LVR+OCR all needed for financial stability & inflation.RBNZ can then push back on dumb policy f… https://t.co/CqXISZUHGq
16/08/2017 7:27 PM
@SelwynPellett Farming capital gains makes it hard to pay current expenses hence the need to externalise costs. Th… https://t.co/J1yevZAHft
14/08/2017 5:46 PM
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19
DEC 11

Escaping the debt trap




Numbers were a big issue leading up to the election. There was debate on the level of spending, net debt vs. gross debt and the time it will take a particular policy framework to deliver a surplus to the Government current account. Out turns of our national accounts depend on our ability to earn as much as our propensity, or otherwise, to spend.

Boosting earnings now needs more than lip service in regard to rebalancing our economy. Treasury forecasts show the Government’s current account in surplus during 2015 based on what we have always seen as optimistic growth forecasts - bring these back to even historical averages and surplus might prove to be elusive. Add to that the softening world forecasts and a surplus during 2015, on a business as usual basis, is not going to happen. The forecasts for growth in private debt will also see the total national debt expand rapidly.

The following tables demonstrate the split between Government and overall national debt. The first is from the Treasury’s pre-election update and the second is from this years’ Budget.

 

This debt problem means that offshore borrowing will continue to prop up the New Zealand dollar. In addition to increased debt servicing, our borrowings are killing our ability earn and invest – we are in a debt trap and business as usual will not save us.

Both major political parties have had a change in their leadership group and a change in economic strategy could accompany the new faces. Steven Joyce has been promoted to create jobs and growth, and an increased focus on the tradable economy is the only way of achieving this. David Shearer must also consider the traded economy when deciding on his economic team. All parties must look to build on some promising new ideas tabled in this electoral cycle.

Policies to increase foreign earnings; reduce foreign borrowings; and to encourage domestic saving are needed to escape the debt trap we are in. Reform of Monetary Policy must be at the top of this list. Fiscal responsibility is important, but earning more through growth in the real economy must be the top priority if we are to solve the debt problem.
 


tags: gross debt, public debt, monetary policy
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