NZ dangerously in debt: top businessman
New Zealand is dangerously in debt and the public needs to be better informed if the economy is going to recover, says a prestigious national businessman.
Kerry McDonald, who is the chairman of the Government's Savings Working Group, spoke about the problems with New Zealand's economy to 40 businessmen at a Southland Chamber of Commerce luncheon in Invercargill yesterday.
He told the group the economy was seriously weakened because of poor Government policies during the past 10 years, which allowed the housing boom to run unchecked, large incentives to invest in rental housing and a lack of response to the declining tradeable goods sector.
As a result New Zealand's net foreign liabilities, which included private and public debt and foreign investment, was similar to that of Greece and Ireland. If the country continued to borrow and spend the market would come to a "sudden stop", he said.
"It's [New Zealand's] citizens are eating its breeding stock and next season's seed – it's dangerously in debt but still borrowing heavily," he said.
To solve the problem the Government needed to increase national savings and to focus on such things as the tradeable goods sector. However, to do this the Government needed to take a harder line.
The public did not understand the extent of the weakened economy and would not support the Government, making it harder for politicians to make changes, he said.
"The public that does not understand the nature and significance of the issues ... is the problem," he said.
Without Government changes the foreign ownership of New Zealand would also continue to rise rapidly and Kiwiswould no longer own capital or get returns, Mr McDonald said.
This would "leave New Zealanders as wage earners, in a global market which is dominated by the low wage, high productivity (and) emerging economies", he said.
Venture Southland enterprise and strategic projects group manager Steve Canny, who attended the luncheon, said Mr McDonald's focus on an export-driven recovery would sit well with Southland.
New Zealand was importing far more goods than it was exporting and that needed to be corrected, he said.
The value of rural production regions needed to be recognised and if an increase in exports was achieved it could lead to benefits for Southland, such as improved roading and communication, he said.
South Port chief executive Mark O'Connor, who also attended the luncheon, agreed with Mr McDonald's stance and said people needed to realise the serious condition of the economy.
There was a negative view in New Zealand that businesses making a lot of money was bad, but unless that happened, tax could not be collected and there would be no provision for investing in things like the environment and what made New Zealand special, he said.