NZ no Ireland, says English

HAMISH RUTHERFORD
Last updated 12:03 18/02/2014

Relevant offers

Politics

Sales a case of opportunity lost Dunne: No conflict in son's job Labour backs 'subbies' English upbeat despite 'average' proceeds Red-zone the flood-prone houses - Dalziel Today in politics: Saturday, April 19 New social housing accord Benefit figures at five-year low Labour auctions Tongan king's wine 'New low' for Prime Minister John Key- Greens

Finance Minister Bill English is dismissing comparisons between New Zealand and Ireland as it was before the global financial crisis.

Stephen Jen, a partner at SLJ Macro Partners and a former global head of currency research at Morgan Stanley, last week raised doubts about New Zealand's economy.

"New Zealand has severe structural weaknesses that are very similar to those of crisis-hit southern European and southern emerging-market economies," the top UK hedge fund manager told clients.

The New Zealand economy was "like Ireland in 2007", he said.

He predicted that the New Zealand dollar might be overvalued by 20 per cent, saying the economy had a "fragile core" and "a growth model based on debt and credit, low savings rates, and current-account deficits".

He admitted that the views were in stark contrast to those of the wider market, with HSBC recently describing New Zealand as having a "rock star" economy.

English said Jen's comments were ill-informed, although he agreed the currency was overvalued.

"The idea that New Zealand is somehow massively uncompetitive is wrong," English told reporters in Parliament today.

"Every New Zealander in their workplace and household has been through quite a lot of change over the last five or six years as a result of the recession.

"They're more conscious about debt, they're careful about spending, their workplaces have had quite a big sort out so they can stay competitive and keep their jobs.

"That's not what happened in those other countries."

The comparison with Ireland was baseless. Ireland's economy had been through a major banking crisis at a time when public debt was already high, English said.

New Zealand had a reasonably high exchange rate and household debt "but New Zealand's in good shape to deal with the adjustments needed if the exchange rate comes down".

In addition, New Zealand's economy had a way of adjusting through a lower exchange rate "in a way that places like Ireland and the southern European economies can't", English said.

Ad Feedback

- © Fairfax NZ News

Special offers
Opinion poll

A "fat tax" on sugary drinks is:

A good idea

A bad idea

Vote Result

Related story: PM rejects 'fat tax'

Featured Promotions

Sponsored Content