IDEAS home Printed from
   My bibliography  Save this article

New Zealand’s imbalances in a cross-country context


  • Daan Steenkamp

    (Reserve Bank of New Zealand)


New Zealand’s current account deficit is the counterpart of a low rate of national saving relative to domestic investment. Persistent current account deficits have led to the build-up of a large net international investment position (NIIP) financed largely through foreign debt with short maturity. Dependence on foreign capital makes New Zealand vulnerable to changes in the availability and cost of external financing, although New Zealand has not added to this vulnerability by taking on currency risk. Debt maturity has lengthened over the recent past in response to market pressure and the Reserve Bank’s Prudential Liquidity Policy. Apart from New Zealand’s financial vulnerability, high debt levels threaten to weigh on economic growth by raising interest rates and crowding out private investment. A strong fiscal position in the run-up to the global crisis served to allay concerns over New Zealand’s credit worthiness, but the government’s finances have deteriorated in the wake of the crisis. It would therefore be prudent to improve the fiscal position sooner rather than later. Faster fiscal consolidation would also contribute to the required rebalancing of the economy towards higher saving and exports. This article considers New Zealand’s imbalances in a cross-country context in order to highlight sources of vulnerability.

Suggested Citation

  • Daan Steenkamp, 2010. "New Zealand’s imbalances in a cross-country context," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 73, pages 37-49, December.
  • Handle: RePEc:nzb:nzbbul:dec2010:5

    Download full text from publisher

    File URL:
    Download Restriction: no

    References listed on IDEAS

    1. Rebecca Craigie & Anella Munro, 2010. "Financial sector amplification and credit cycles in New Zealand," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 73, pages 15-34, June.
    2. Emmanuel De Veirman & Ashley Dunstan, 2008. "How do Housing Wealth, Financial Wealth and Consumption Interact? Evidence from New Zealand," Reserve Bank of New Zealand Discussion Paper Series DP2008/05, Reserve Bank of New Zealand.
    3. Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series 09/04, New Zealand Treasury.
    4. Anthony Makin & Wei Zhang & Grant Scobie, 2009. "The contribution of foreign borrowing to the New Zealand economy," New Zealand Economic Papers, Taylor & Francis Journals, vol. 43(3), pages 263-278.
    5. Garry Tang & Christian Upper, 2010. "Debt reduction after crises," BIS Quarterly Review, Bank for International Settlements, September.
    6. Anella Munro & Rishab Sethi, 2007. "Understanding the New Zealand current account: A structural approach," Reserve Bank of New Zealand Discussion Paper Series DP2007/10, Reserve Bank of New Zealand.
    7. Emmanuel De Veirman & Ashley Dunstan, 2012. "Debt Dynamics and the Relationship Between Consumption and Cyclical Wealth Changes," The Economic Record, The Economic Society of Australia, vol. 88(282), pages 330-340, September.
    8. Sebastian Edwards, 2006. "External Imbalances in an Advanced, Commodity-Exporting Country: The Case of New Zealand," NBER Working Papers 12620, National Bureau of Economic Research, Inc.
    9. Iris Claus & Grant Scobie, 2002. "Saving in New Zealand: Measurement and Trends," Treasury Working Paper Series 02/02, New Zealand Treasury.
    10. Paul Bedford, 2008. "The global financial crisis and its transmission to New Zealand – an external balance sheet analysis," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 71, December.
    11. Kim, Kunhong & Hall, Viv B. & Buckle, Robert A., 2006. "Consumption-smoothing in a small, cyclically volatile open economy: Evidence from New Zealand," Journal of International Money and Finance, Elsevier, vol. 25(8), pages 1277-1295, December.
    12. Mizuho Kida, 2009. "Financial vulnerability of mortgage-indebted households in New Zealand - evidence from the Household Economic Survey," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 72, pages 5-12, March.
    Full references (including those not matched with items on IDEAS)


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. Jean-Pierre Andre, 2011. "Economic Imbalances: New Zealand's Structural Challenge," Treasury Working Paper Series 11/03, New Zealand Treasury.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:nzb:nzbbul:dec2010:5. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Reserve Bank of New Zealand Knowledge Centre). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.