The NZ economy is being insulated from the real impact of recession by the huge numbers of people either,on a benefit,working in Councils or jobs dependent on, or working for Govt or jobs dependent on.
As an example I talked to a friend this morning 4 children working, one teaching,one armed forces one for broadcasting, one employed by UNI,husband DOC. Not one of his children is dependent on the export sector or in production orientated business. This govt is going to borrow billions and get the productive sector to pay it back with interest from future time and earnings . Not a good idea, this insulation for Govt workers and Co,will have to break down some time in the future but Nats attitude is not on our watch.
The export sector is no longer competitive enough to provide the earnings to continue our present standard of living.

Denninger this morning

http://market-ticker.denninger.net/

First, there is a "critical level" beyond which all debts will default - without exception. That point is where the carrying cost exceeds income. For example, if you have a $100,000 mortgage and $9,999 (or less) in income, if the interest rate is 10% every such mortgage will default since you can't pay $10,000 with $9,999.

Because the debt is still out there and the ability of the government to continually borrow more money forever to use in these subsidies for the purpose of halting the shift to the left in the debt/income default function does not exist.

Oh sure, government can do this for a while - and it has. But not forever, and yet "forever" is what is required, until and unless those debt levels go down or income levels go up to get us back into the "safe" zone of the default function.

Yet the government's actions in fact move the curve the wrong way over time! That is because government borrowing is in fact debt that ultimately must be paid for out of individual income. While it is "cheap" borrowing it has not (and doesn't) replace the high-cost debt that is causing the problem - it is simply a means of attempting to subsidize the current payment required to keep the default from happening "right now" (as in this month.)

We are doing the wrong thing because government and The Fed have misdiagnosed (either intentionally or not) the cause of the recession and thus whether their tonic can be effective.

During an ordinary inventory-led recession where excessive credit is not the triggering cause (rather, it is over-capacity in the economy) the tonic applied is useful, because stimulating demand causes the slack to come out. It also causes debt:income ratios to expand, but remember the default function - so long as you are a good distance away from the "zero point" this has little cost in terms of increasing the actual number of defaults. It does, in each and every case, shave the safety margin. We've gone through multiple recessions (all the way back to the 1970s) where we had lots of safety margin, and as a consequence this "tonic" seemed the right medicine for the job.

The problem is that we never forced the contraction of borrowing and thus never, over more than 30 years time, caused the safety margin to be rebuilt!

When you are in a recession that is occasioned by getting "too close to the sun" - that is, too close to the zero point - such policies are a disaster, because there is no safety margin left - you have in fact entered the parabolic zone of defaults, where anything that ramps the debt/income ratio at best masks the problem for a period of time and at worst can drive you into the maw of what amounts to a singularity - the implosion of your economic and monetary system.

"Composition of growth likely to be unfavourable for the unwinding of imbalances'.

This is the key bit.

To be honest all these numbers are not that important (other than unemployment).....GDP growth blah blah......how we generate our income and how we pay for it is still the key issue for NZ Inc.

That's one thing Bollard has grasped.....can he crack it though?

Right in one AndrewJ. This is the true parasite economy, however, the host, the productive sector, is just about dead.

Forget more taxation, CGT, all that thieving shite that our economists continue to bluster about, in a most insulting fashion. What has to happen is one State servant in two, forthwith, be laid off so they are not sucking up a wage from the productive sector that pays their wage, while holding that same sector back. Decimate the size of the State, move toward laissez faire, and freedom of the individual from the State: that's the the only solution to this.

But while we have yet another ignoble government in, our politicians more concerned with how to rort honest, risk taking producers of our real wealth, to get their fraudulent perks - Mr English and Mr Douglas - then it's just the long road to the Gulag. Bit by bit.