New Zealand’s imbalances in a cross-country context
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.
Volume (Year): 73 (2010)
Issue (Month): (December)
|Contact details of provider:|| Postal: |
Phone: 64 4 471-3767
Fax: 64 4 471-2270
Web page: http://www.rbnz.govt.nz
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Garry Tang & Christian Upper, 2010. "Debt reduction after crises," BIS Quarterly Review, Bank for International Settlements, September.
- 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.
- Grant M. Scobie & Katherine Henderson, 2009. "Saving Rates of New Zealanders: A Net Wealth Approach," Treasury Working Paper Series 09/04, New Zealand Treasury.
- 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.
- Anthony Makin & Wei Zhang & Grant Scobie, 2008. "The Contribution of Foreign Borrowing to the New Zealand Economy," Treasury Working Paper Series 08/03, New Zealand Treasury.
- 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, 09.
- Emmanuel De Veirman & Ashley Dunstan, 2010. "Debt dynamics and excess sensitivity of consumption to transitory wealth changes," Reserve Bank of New Zealand Discussion Paper Series DP2010/09, Reserve Bank of New Zealand.
- 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.
- Iris Claus & Grant Scobie, 2002. "Saving in New Zealand: Measurement and Trends," Treasury Working Paper Series 02/02, New Zealand Treasury.
- 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.
- 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.
- 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.
- 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.
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)
If references are entirely missing, you can add them using this form.