Dealing with the Balance of Payments crisis

Published: Wed 8 Sep 1999 10:02 AM
Living beyond our means, dealing with the Balance of Payments crisis
Jim Anderton MP Wed Sep 8 1999
The balance of payments deficit has reached a crisis point. At $6,374 million in the last year, every New Zealander is spending $33 dollars a week more on imported goods, than we earn from the sale of our nation's exports, said Alliance leader Jim Anderton today.
The Alliance proposes bold initiatives to deal with the crisis
'New Zealand cannot sustain this sort of debt for much longer. Under WTO rules and regulations we have the right to deal with this sort of ballooning debt. Indeed we must deal with it,' said Jim Anderton.
GATT and WTO rules make it clear that tariffs can be imposed for balance of payments purposes and in fact they are preferred rather than reducing the quantity of imported goods.
The balance of payments is the difference between the amount New Zealand earned overseas last year and the amount it spent. This is the 27th consecutive year New Zealand has run a balance of payments deficit - a world record for a developed nation.
The Alliance proposes a temporary 5% increase on tariffs on imports excluding Australian goods as a way of decreasing our reliance on imports until our balance of payments problem is under control.
'Only about 17% of our GDP consists of goods that would attract this tariff.
'This means that in $100 worth of supermarket goods, only $17 of that would be increased by 5%. This is equivalent to an 85c price increase, or about the cost of an American Hershey's chocolate bar.
'The government's rapid removal of tariffs has only served to take more money out of New Zealanders pockets to pay for increased overseas debt. The removal of car tariffs, for example has directly contributed to the balance of payments crisis.
After two full years running a current account deficit in excess of 6% of GDP, Jim Anderton says the climate for the use of tariff policy is changing.
'No one can seriously believe that overseas deficits of this size are sustainable. The deficit is so large and so intractable that it restrains economic growth. The economy can't pick up quickly without sucking in imports, which in turn worsens the deficit and slows growth.
'The rest of the world will very soon wake up to New Zealand's real and weak economic position.
'We now owe $102 billion in overseas debt, $27,700 per New Zealander. We are paying for this overspending and overseas debt in lower wages, higher interest rates and lower company profits.
'We estimate that New Zealand demand stimulated from this modest tariff would create at least 26,000 jobs over the next five years as well as increasing government revenue that can be spent on health and education initiatives,' Jim Anderton said.
Alastair Thompson
Scoop Publisher
Alastair Thompson is the co-founder of Scoop. He is of Scottish and Irish extraction and from Wellington, New Zealand. Alastair has 24 years experience in the media, at the Dominion, National Business Review, North & South magazine, Straight Furrow newspaper and online since 1997. He is the winner of several journalism awards for business and investigative work.
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