Re: Re: Current account deficits (was The IMF and thePresidential Candidates)

[Bill Rosenberg <w.rosenberg@xxxxxxxxxxxxxxxxxxx>]

Jim Devine wrote:
>
> At 09:04 AM 9/1/00 +1200, you wrote:
> >Been meaning to ask this for a while:
> >
> >New Zealand has been running a current account deficit for 27 years. It is now
> >at about 8% of GDP. Sounds dangerous to me, but Treasury and other orthodox
> >economists here (following Friedman) say no need to worry with a floating
> >dollar.
> >
> >Should we worry? Why?
>
> How high is NZ's external debt relative to its GDP and exports? How high is
> its interest and other debt-service relative to its exports?

External debt -  NZ$109.1 billion at 31 March 2000, or 329.4% of Goods and
Services exports, or about 105% of GDP, and has been at similar levels for
several years. 15% is Official (govt) debt, 85% corporate.

Income on investment and debt - on FDI in NZ, year ended 31 Mar 2000 - NZ$5039b,
on portfolio and other investment, $2952b, total $7992b. From NZ investment
abroad - total income $199m (yes - not an error!).  Net investment income on
foreign investment -$7791b or about 24% of G&S exports.

Has it been used to pay for productive investment or boondoggles? Given the
growing G&S deficit, and the huge spending on imported cars for example, largely
boondoggles. Haven't seen any analysis of this question (though this "if" it is
always cited as a reason why we can afford to have this persistent deficit).

Bill

>
> More importantly, has the debt been used to pay for productive investment
> or for boondoggles? Back in the 19th century, the US ran big trade and
> current-account deficits but it didn't hurt since most went for productive
> investment (railroads, etc.) which helped the US make the debt-service
> payments. These days, the US current account deficit is more serious, since
> it mostly goes to finance consumer spending, which doesn't help deal with
> debt service.
>
> Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine

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