“..It is a timely reminder..that the country is up to its neck in debt to the rest of the world..it is an uncomfortable position at the best of times..and these are among the worst of times..”
“..Standard & Poor’s has put the Government on notice that the country’s sovereign credit rating is at risk of downgrade..
..now that our parlous external accounts have been joined by rapidly deteriorating fiscal ones.
It is a timely reminder that the country is up to its neck in debt to the rest of the world..
..and that limits the Government’s room for maneuvering now..
..even though the debt has very largely been run up by the private sector.
In the year to September 2008 the current account deficit was $15.5 billion or 8.6 per cent of GDP.
Years, nay decades, of such deficits have pushed the country’s net international investment position deep into the red.
At $165 billion (net of New Zealand assets abroad) it is equivalent to 92 per cent of GDP.
Among developed countries only Iceland’s ratio is higher.
The United States’ net debtor position..about which there has been so much hand-wringing..by contrast is about 20 per cent of GDP.
It is an uncomfortable position at the best of times and these are among the worst of times.
For some years the rating agencies, S&P particularly, have in effect been warning that we could only expect to get away with external accounts in this state because the Government’s accounts, by contrast, were a model of providence.
A decade and a half of fiscal surpluses has reduced gross Government debt to 18 per cent of GDP and net debt to zero.
But that was before the global economic crisis..”
go to source/story>>Brian Fallow : Shifting the burden not the answer - Business - NZ Herald News