Media release September 22, 2000
Look out for the fire sales!
The current account deficit worsening by $3.4 billion, or 81 per cent in the year to June shows what an unstable state
the last Government left the economy, says the Employers & Manufacturers Association (Northern).
"Wait for the fire sales on all those used Jap cars stacked up in yards around the country," said Alasdair Thompson,
EMA's chief executive.
"Never before have so few borrowed so much to spend on so many imported goods.
"We can't blame it on buying the frigate or on the rising price of oil.
"The impact of our falling dollar also means now the interest repayment costs on our $100 billion plus of accumulated
overseas debt have risen strongly in real terms over recent months. We will have to export much more to pay off the cost
of these borrowings.
"The latest debt figures also make very plain why overseas investors have lost interest in our economy - the return from
dividends from their businesses in New Zealand as measured in our currency is still shrinking.
"The good news is that our trade goods account is about to move back into credit for the first time in over six years.
High commodity prices, and rapidly growing exports of high value goods into the United States will see to this. It
represents the start of our transition back into an export driven economy, and it will happen within two months.
"In the meantime, demand on the domestic market is sure to dry up further.
"The situation overall will prove the mettle of Government - we urge the Prime Minister and Finance Minister Cullen to
state now what their policies are for lifting our economic performance.
"To date they have shown poor economic leadership and no sense of vision on how to get the country working.
"Investors need the confidence that further, frequent statements on what our economic future is to be. These must be
heard as a matter of Government routine.
"Government must also seriously consider implementing radical measures such as a zero corporate tax rate, as we
recommended many months ago.
"Keeping a tight rein on Government's own spending will assist, though reducing it would be unhelpful at this time.
"Tweaking the fringes of the present mix of economic policy will plainly not unload us from the burden of combined heavy
real interest rate payments and a lack of investor confidence."
Further comments: Alasdair Thompson tel 09 367 0911 (bus) 09 303 3951 (hme) 025 982 024