Top 10 charts for 2010: Net debt heads for 90%

Top 10 charts for 2010 with BNZ: Why our net international investment position looks better for now, but will worsen again

1st Jan 11, 5:00pm by Bernard Hickey

Bernard Hickey details the 6th chart in our Top 10 charts for 2010 in association with Bank of New Zealand.

This chart from Finance Minister Bill English's presentation of the government's fiscal and economic update on December 14 shows New Zealand's net international investment position improved significantly between the May budget and the December half year update.

The net international investment position measures a bunch of things and wobbles around a lot.

It includes the value New Zealand owned assets overseas, New Zealand lendings overseas, foreign owned assets in New Zealand and foreign lending into New Zealand. It includes both private and publicly owned assets and debt.

The net position improved in New Zealand dollar terms in part because the value of New Zealand owned assets overseas rose (particularly in Australia) because the New Zealand dollar fell to a 10 year low vs the Australian dollar.

Also, the foreign owned banks booked much lower net profits and repaid fewer dividends over the last year because of a big win for the Inland Revenue Department in a series of court cases.

Slower economic growth also softened demand for imports and stronger commodity prices boosted export returns.

Also, weaker profits from other foreign owned companies, because of the weaker economy, reduced the outflow of dividends.

However, this improvement is seen as temporary before New Zealand's national savings problem eventually starts driving the debt up again as a percentage of GDP to over 90% again, putting New Zealand in the same vulnerable position as Greece, Ireland and Portugal.

This is not as bad as forecast in May because of the factors mentioned above, the long term trend is disturbing for foreign investors.

New Zealand may not have the same government debt problem as these three PIGs countries do, although it's notable that neither did Ireland in 2008 before the Global Financial Crisis. Ireland's mistake was to guarantee its banks, which then collapsed and forced the Irish government to take on much more debt because of it.

New Zealand also guaranteed its banks and finance companies. Luckily for the government, the banks have not collapsed, although the collapse of the guaranteed finance companies has already cost more than NZ$2 billion.

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62 Comments

by JB | 1st Jan 11, 7:55pm 1293864906

QUESTION:

Does this updated graph imply that we are going to run current account surpluses during a period when the Crown is borrowing ~ $ 10 + B per annum ?

As the Japanese would say politely " Some things are very difficult ... " or Yeh Right !

The recent improvement to 2010 has been largely an FX issue.

by Bernard Hickey | 2nd Jan 11, 5:05am 1293897900

The theory is we will be running strong trade surpluses because of high commodity prices.

But you're right that we haven't fixed either our structural current account deficit problem or the government's structural budget deficit. Curiously they are the same number -- 4% of GDP.

cheers

Bernard

by Wolly | 2nd Jan 11, 7:38am 1293907100

The theory is we will believe we will be........!

by muzza | 1st Jan 11, 9:54pm 1293872066

We are doing as well as can be expected in such trying times and the steady as you go approach seems preferable to any other

by Wolly | 2nd Jan 11, 7:40am 1293907231

It "seems preferable" to you Muzza because you believe it to be so...because you are not able to see that there were and are other approaches to putting right the mess.

by amalgam | 4th Jan 11, 12:01pm 1294095666

Fear and vested interest, Wolly.

The likes of muzza are happy to see the NZ economic Titanic hold its course because they personally are doing well so long as it does so.

Any attempt to steer a different course - or even discussing a possible course change - is perceived as a threat to their personal bubble world and fills them with fear and loathing.

Unfortunately the muzza-inertia is vast, possibly overwhelming, so the chances of a much needed course change is slim.

Full speed ahead, and damn the torpedoes!

by Gummy Bear Hero | 4th Jan 11, 12:12pm 1294096331

If the alternative is for National or Labour to construct more central control over the economy , then muzza is correct . Steady-as-she-goes is not our best option , but is infintely preferable to Muldoonesque think-big / government command and control .

..............Hey , anyone placing bets on David Cunliffe ousting Phil Goff this year........ ?

Cunny wants control ! ...Labour first ......NZ second .........NZ's GDP is the next target . Boy wonder is a power-mad control freak ............... Auntie Helen must be so proud of the lad .

by amalgam | 4th Jan 11, 12:14pm 1294096476

How long before the traditional National party leadership coup?

It can't be far away.

by Larcus Mush | 4th Jan 11, 12:38pm 1294097907

Hey, that's funny, some friends and I were discussing this last night! Will Key break the jinx or is he going to get the knife in his back, just like all of his predecessors?

by Wolly | 4th Jan 11, 12:28pm 1294097302

Smarmy hasn't a chance gummy...doesn't have the right image...needs to dress in messy overalls, wear a cloth cap and working boots.

by Gummy Bear Hero | 4th Jan 11, 12:38pm 1294097912

When was the last time that Labour had a prominent MP true to the roots of the labour movement ? ............. Any amongst them with calloused hands , or a forklift licence , or without a platinum credit-card , or with a season ticket to a super-15 rugby team ????

by Wolly | 4th Jan 11, 12:41pm 1294098093

They avoid that route Gummy....easier to stick with the envy politics of promise.

by Kunst | 2nd Jan 11, 10:28am 1293917320

Business as usual ???

Does anyone takes “Climate change” and it’s consequences for New Zealand in terms of Agriculture and Tourism into consideration ? It seems to me that hardly anyone making NZpredictions think in connection/ correlation with worldwide political/ financial/ social/ ecological etc. events.

Are we humans stupid enough and don’t make hardly any adoptions to the fact that the world is changing in many ways ? Just checking on local council policies, how good are 5- 10/20 years planning mechanism ? A new museum planned 3m above sea level ???

by Cleo | 2nd Jan 11, 5:52pm 1293943970

Walter I know of a number of people who rant on about how there is no such thing as climate change and that even if there is it is all part of natures cycle and the world will right itself.

Thats all very well, but what people seem to misunderstand is that when nature goes through cycles like this, entire civilisations have been wiped out. And whats more, change is happening way faster now than it ever has in the past and there are way more challenges being put to the earth than ever before, simply with the sheer volume of humanity on the planet. We are depleting the worlds resources at a huge rate. We cant go on doing this.

As for NZ Agriculture, I love it how NZX is putting a lot of its eggs in the Fonterra basket. Dairy in NZ is not a good way to go. $1billion to clean up the Waikato River of all its effluent. Out of $10billion of Dairy Exports, $1billion to clean up the Waikato River alone is quite a lot. How much for Taranaki, Manawatu, Wairarapa etc etc? What price for the NZ environment, and at the end of the day, most of this goes out as Milk Powder! And of course, lets not forget that cows in Germany for example are more than twice as productive as cows in NZ.

by Kunst | 2nd Jan 11, 6:43pm 1293946997

For years all my articles are about sustainability. Branding for a “100%NZpure Economy” would create billions setting up new prospers companies/ industries. Because of structural problems, what is currently happening with most western economies (NZ is a classical example) is uneconomic growth – with a massive financial burden for the next generation- exactly what your are mentioning too.

Small New Zealand needs to think smaller, but with bigger ideas. More diversity and quality in the agriculture industry in order to be flexible in an upcoming turmoil scenario is the key.

by Kunst | 2nd Jan 11, 9:52pm 1293958343

What did Germany do to turn their economy around and become an export powerhouse. And what can we learn from their success. We are not talking German coal and iron ore exports, we are talking about consumer goods, industrials, machinery and equipment and utilities in other words not raw materials but exporting items that require substantial infrastructure, skills, development, value adding and investment.

Germany’s economy is now built around manufacturing and exporting those manufactured goods to the rest of the world.

There are industrial giants like BASF, Siemens and Bayer present in Germany, but more importantly there are around 6000 German companies focused on machinery and equipment. The real strength lies with the small and medium sized manufacturers who employ the bulk of the workers.

http://www.buyaustralianmade.com.au/blog/2010/10/06/australian-exports-australian-manufacturing/

I’m of the view we should have a NZtailor- made economy branding for a “100%NZpure Economy”

Above example just shows in countries where manufacturing is strong the economy is relatively healthy and societies are wealthy.

by Kunst | 3rd Jan 11, 9:16am 1293999374

Sorry Bernard- I'm lost !

Many bloggers like me spend hours writing valuable articles into this blog with ideas to improve our economy. I think this are reasons enough to stimulate debates at least.

I ask myself - does that make sense, when at the same time even the host - Bernard makes insignificant comment on property issues ?

Why is it that most everything is on property, charts, %, chicken feed policies and hardly anyone talks about the real helpful issue for our nation - how to improve sustainable production ?

What on earth goes on in this nation – muddling along ?

I’m lost !

by Wolly | 3rd Jan 11, 10:07am 1294002424

You need to buy more property Walter...get with the game...Bolly's there to help...and the banks will love you for it....deep down you know it's the right move...chase the bargains Walter...heaps of stuff for sale down your way....then rent them out until about 2020 when a stupid govt will open the immigration gate and invite in half a million to pork the market...think of the capital gain and no tax...you can't lose mate.

by Kunst | 3rd Jan 11, 10:52am 1294005141

Happy New Year Wolly – yes I have my principle in life and I’m not greedy. I have never been interested in Property markets. We have a great job working hard, creating works of art since 40 years and a modest happy life, which fits the profile as a member of the planet. The world is changing - simple things in life become more valuable.

Climate Change, economic and political changes will literally shift entire population.

by Cleo | 3rd Jan 11, 10:59am 1294005598

Morning all

New Zealanders are obsessed with property arent we. But then, where else do you put your money? NZX????

by The Real The Man | 3rd Jan 11, 1:36pm 1294014964

Kiwis have always been fans of "think small". It's why we're so rich and powerful.

by Gummy Bear Hero | 3rd Jan 11, 2:41pm 1294018861

Hello Walter : I replied to your comment , but totally in the wrong place............ Bugger , I'm lost too ! .................... All this sitting on the beach , watching the waves roll in .......... I need a holiday . Know anywhere that I can get away from it all ?

by Cleo | 3rd Jan 11, 2:57pm 1294019860

GBH I found your reply. But its what I said - where else do you put your money - NZX????? (Only I used a few less words than you.)

by Gummy Bear Hero | 3rd Jan 11, 3:00pm 1294020050

Put it in the ASX ( Australian Stock Exchange ) ..........[.. You're correct ........Fewer words is OK .... ]

by Cleo | 3rd Jan 11, 3:58pm 1294023501

Mind you, you did say it very eloquently.

by Gummy Bear Hero | 3rd Jan 11, 4:13pm 1294024394

Cheers ! ........... But it is sad for me , as a Kiwi proud of my small country , that I have to invest off-shore due to the poor securities regulations , and asleep-at-the-wheel regulators ( Jane Diplock ) .

There are some excellent companies listed on the NZX . However there should be many more , at least double the current number of stocks available .

And what a loss to us all that the owners of TradeMe sold out to the Australians ( Fairfax ) , rather than list it as a stand-alone company on the NZX . It would now be the flag bearer tech stock of our bourse . Assuredly the opportunity to purchase a stake in TradeMe would have re-focused many private investors towards our sharemarket , and possibly , away from houses .

by Wolly | 3rd Jan 11, 4:20pm 1294024841

"away from houses"....well you can kiss goodbye to that knighthood now Gummy...fancy suggesting an end to the great South Seas Ponzi scheme...shame on you. Send me your money and I'll buy you good property.

by Gummy Bear Hero | 3rd Jan 11, 4:36pm 1294025783

The sooner that NZ grows some balls , and flees England's " empire " the better !....... End that idiotic knighthoods-for-the-boys , rubbish .

We stood up to the Yanks over their war-ships , but don't have the same intestinal fortitude to tell Queenie and Chuck to nick off ? ........... Bizarre !

But thanks for the offer , Wolly . I have a good property here in the Philippines . And we have added an extra outside shower/bog and guest-hut ........... No permits or plans required , no extra fees , or greedy council larceny . ............ Yer just tell the guys whatcha want , and they construct it .......... Life is simple , so uncluttered by busy-body bureaucrats , or civil serpents .

And the workers build to a standard , that it'll withstand a typhoon . Simple really , that they want me to employ them again sometime , so they do a bloody good job on their own volition .

by amalgam | 3rd Jan 11, 4:49pm 1294026589

We stood up to the Yanks over their war-ships...

Bloody socialists.

by Cleo | 3rd Jan 11, 6:59pm 1294034372

True. And the thing I really cant understand, is what exactly does Mark Weldon do? He spends the majority of his time flitting around overseas but doing what? How often is he actually here? Shouldnt he be focussed here in NZ on increasing the numbers and value on the NZ exchange? And then NZX starts chasing the dairy dollar, and we have already had a discussion here on the long term value and sustainability of that!

by Gummy Bear Hero | 3rd Jan 11, 7:59pm 1294037956

One of the financial analysts at the NZ Herald nicknamed the NZX , " Weldonia " , in light of his behaviour . As a holder of 11 % of the NZX's own shares , he appears to use the business as his personal plaything .

Having seen Mark Weldon on TV once , being interviewed on one of the early morning business shows , I was inspired to sell my NZX shares later , when trading began . The guy demonstrated a robust belief in his own knowledge and self importance ( i.e. a jumped-up arrogant prat ) . .............. NZX shares have slopped around sideways ever since .

by Cleo | 3rd Jan 11, 8:55pm 1294041300

You eloquence again, ".....a robust belief in his own knowledge and self importance...." I love it.

by speckles | 2nd Jan 11, 11:09am 1293919752

No because not easy to model and also harder to generate the right result which in this case is to show light at the end of the tunnel :-)

by Kunst | 2nd Jan 11, 12:31pm 1293924687

Yes, that’s why families, businesses, entire economies and countries go bankrupt – no long term planning or/ and structured economy – just muddle along – wait and see – see and wait - good as gold – etc.

No - in my view Key didn’t pass the test: Minister Brownlee, Hide and Joyce should be sacked because of underperforming. Another case of politicians – muddling along. Unfortunately this is supported by the media and a wider population. For how much longer can we afford to continue that way ?

Today's full article:

http://www.stuff.co.nz/national/politics/4507522/PM-John-Key-passes-test-of-judgement

by Gummy Bear Hero | 2nd Jan 11, 12:38pm 1293925128

" No One Spoke of Pain " : B. Hickey , from the NZ Harold : --

The question is , do either National or Labour realise that the game can't go on as it is . That the rules have changed . That growth will not materialize as if by magic ( because it always did previously , emerging from a recession ) to lift us up and over the burden of our debts .

National has a steady-as-she-goes approach , 'cos come hell or high water , they're sticking to the enormously generous election bribes of Labour's Michael Cullen .

And Labour think that Cullen was right , and Cunny wants to bolt-on more to those seriously dopey economic policies . Meanwhile Goofy witters inanely about " sustainability " just as Herr Clark did , with no idea as to what that really means .

The average Joe or Joanne Kiwi in the street know there's pain , as their lives are transformed at work , or in their daily cost of living . It's the 122 plonkers in the Beehive who havn't gotten the message , yet .

There will be pain .

by Lucky Basket | 2nd Jan 11, 2:17pm 1293931071

Is there anything you cannot twist into an attack on the NZ Labour party?

by Gummy Bear Hero | 2nd Jan 11, 2:30pm 1293931824

Yes , there is , the increased price of Tanduay Rhum in the ilo ilo liquor store ............ Havn't yet traced that to the NZ Labour party , but I am researching it ....... Only a matter of time til I find the connection............

by Wolly | 2nd Jan 11, 3:51pm 1293936679

Don't upset yourself so early in the new year LB.....give this bunch in the Beehive about three more terms in office ..time for enough brainless voters to forget the Clark rubbish...and you will see Labour return to the pig trough just as the first sign of real economic stability arrives...just in time time to make another total arse of everything.

by Malarkey | 2nd Jan 11, 5:20pm 1293942000

You mean like how the brainless voters forgot about the Bolger/Shipley rubbish and returned this lot to the pig trough after Clark's three turns "in office"?

Things certainly didn't improve that time either.

by Wolly | 2nd Jan 11, 6:05pm 1293944706

True enough Malarkey and that about sums up the country and its economy. A never ending stream of useless govts.

by Cleo | 2nd Jan 11, 6:26pm 1293946010

Not just the useless governments Wolly, but also the people who vote a particular way simply because 'its time for a change' with no real understanding of what they are voting for. Or any care to understand.

by powerdownkiwi | 2nd Jan 11, 10:30pm 1293960630

GBH doesnt have to attack them - they shot themselves on the foot.

Helen clark 'got it', and made a clear statement about sustainability - painting herself as the first PM to do so clearly.

Then: Nothing. Zilch, Nada, Nought.

Silence.

Let me guess - it didn't poll well.

Which raises the question of Labour:

We know they're prepared to prostitute morals/values/thruths for votes - but have they considered the price they pay?

The only constant is change, the only relevant leadership will address pending change, and a stab in the dark has more chance of being correct, than do-nothing-steady-as-she-goes.

Labour had their chance, and dropped tha baton.

National don't have the brains of the understanding to pick it up.

One of the very few who grasped where we are going (listen to the podcast of the Chris Laidlaw interview from this morning, RNZ) was Jeanette Fitzsimmons.

Labour are a historical relic from the time the cake was being fought over. That will still happen, but now the cake gets progressively smaller. If they get that, they might become relevant again.

But I'm not holding my breath.

Just because a thing polls well, doesnt make it the correct course of action.

by steven | 3rd Jan 11, 9:48am 1294001317

JF - basically why I took an interest in the Green party......and her leaving was why i walked away and stayed away.....these days they play nimbies and socialities.....they have lost the plot....yes even them....more concerned about social justice than sustainability and re-alinging with the concept of less energy every year means a tougher time.

HC and JK wont touch anything that will cost them votes....so what will happen is "emergency measures" will be put in force when it becomes blindingly obvious to the pollies they have no other course of action....and thats probably considerably after its obvious it will happen (Peak oil etc)...just who will end up with coping the smaller piece of the cake will depend on who is in power.....I dont know how this will pan out, National wll try and keep businesses (well finance actually as there is way too much debt) going I suppose by curtailing the poor who dont vote for them anyway.....Labour I dont know what they will do.....Thier energy spokesman is a clueless lawyer either that or he's keeping mum on the issues.....

Given the recent Parlimentary paper and the things Brownlee has said I think they know....but they dont know how to handle it........its simple in a way they need to get bio-fuels off the ground and soon, but that means taking on more debt.....or raising taxes and the voter wont stand that......

Ive given up worrying about it really.....ppl are too fickle....i cant even talk to family about it, I see denial, one in particualr is a "policy analyst" some of her fancy talk is amazingly useless..."we need to move forward once we reach agreement"....hello peak oil isnt something you decide on, its there....if this is the std of govn god help us....so what hope is there in convincing strangers...

regards

by andyh | 2nd Jan 11, 4:14pm 1293938059

Apparently this has been around a wee while but I havent seen it before. If you have 45mins free then it is a very good watch - its message may save you a great deal of pain.

Overdose: the next financial crisis:

http://www.youtube.com/watch?v=4ECi6WJpbzE

by powerdownkiwi | 2nd Jan 11, 10:52pm 1293961948

Andy - enjoy these - graphs for everyone....

http://www.theoildrum.com/node/7282#more

by Wolly | 3rd Jan 11, 8:46am 1293997591

Debt warning here:

"Banks alone must refinance about €400bn (£343bn) of debt in the first half of the year, but add in the more than €500bn European governments must replace over the same period, as well as further hundreds of billions of euros of mortgage-backed debt maturing and there is the potential for chaos in the credit markets.

"What we are looking at here clearly has the potential to become a second credit crunch. However, this time it would be much worse than before," said Celestino Amore, founder of IlliquidX, which specialises in trading hard-to-price debt."

http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8234231/European-debt-markets-face-second-credit-crisis.html

by Wolly | 3rd Jan 11, 8:48am 1293997695

Inflation warning here:

http://www.telegraph.co.uk/finance/comment/liamhalligan/8233584/Why-I-believe-Tim-Congdon-is-on-losing-side-of-monetary-easing-argument.html

by Wolly | 3rd Jan 11, 11:40am 1294008050

"Mr Key said that 2011 election would be challenging for the fact that "essentially there is no money". harald.

And from goofy we will be told it's just a matter of borrowing more and going on a spending splurge...aint that right Goofy!

by The Real The Man | 3rd Jan 11, 1:22pm 1294014152

Yeah, damn Labour and their $300m per week borrowing!!!

by Wolly | 3rd Jan 11, 12:25pm 1294010726

"While those in celebrity circles ponder who the 46-year-old man arrested in Auckland is, politicos are wondering who the "untrustworthy and obnoxious" candidate for Governor General could be."anon...

Oh no no no...... please don't tell us Key suggested HER for the job....!

by The Real The Man | 3rd Jan 11, 1:23pm 1294014229

You mean..... RUTH RICHARDSON?!

PLEASE GOD, NOOOOOOOOOOOOOOOOOOOOOOO.......!!!!

by Wolly | 3rd Jan 11, 12:35pm 1294011347

"CHINA could be hit by inflation of 7-8 per cent in the next two months, panicking Beijing's policymakers into dramatically raising interest rates, economists have warned.

The prospect of at least four further interest rate rises in the world's second-largest economy is likely to alarm global markets, which tumbled in shock at China's decision to raise rates on Christmas Day........ inflation has become the central concern for the Communist Party, which is struggling to contain growing outrage in the People's Republic over rising prices"

http://www.theage.com.au/business/world-on-high-alert-as-china-inflation-soars-20110102-19d0l.html

Going to be a blast this 011...what are the likely consequences of a crackdown in China for aus and NZ.....

"according to Andy Xie, the former China economist at Morgan Stanley. Writing in Caixin, a Chinese magazine, he said the two most likely candidates to trigger the next financial crisis were either the US's sovereign debt or China's inflation."

by The Real The Man | 3rd Jan 11, 1:22pm 1294014124

You are so negative! We're all going to be rich again in 2011!!

by Wolly | 3rd Jan 11, 1:26pm 1294014396

Right...blame the messenger...great way to go!

by The Real The Man | 3rd Jan 11, 1:32pm 1294014732

But haven't you listened to a word muzza's been saying? It's only your negativity which is holding the economy back! If we all close our eyes and cross our fingers and think happy thoughts and say nice things then the economy will get back on track and we'll all be RICH!!!

Apparently that's how it works.

by Gummy Bear Hero | 3rd Jan 11, 2:33pm 1294018436

Walter Kunz : Happy New Year !

In a balanced economy , business ( private , or publicly listed on the local stockmarket ) would warrant far greater exposure here at interest.co.nz . But the NZ economy is so skewered towards houses and dairy farms , that they dominate the discussion here . As does the interest rates .

As Bernard Doyle eloquently put it , the NZX is in a slow death spiral . That is a pity , 'cos there's no shortage of entrepreneural spirit in NZ , nor of small companies requiring funding to take the next step up in market share .

Under the lax securities regulations ( both National & Labour are guilty here ) , the NZX can be a wild west story , with cowboys fleecing the locals , a'la the Feltex debacle , and the ongoing Allied Farmers disgrace .

............. So what're gonna do with yer dosh ? ............ Buy an investment rental !

by michael | 3rd Jan 11, 2:13pm 1294017212

It is puzzling to see NZ being addressed as you would Portugal, Ireland and Spain

by amalgam | 3rd Jan 11, 2:37pm 1294018668

It is puzzling to see some assuming NZ is not at risk.

by michael | 3rd Jan 11, 3:43pm 1294022598

So with china slowing down and NZ entering the twylight zone, then Australia would be the ham in the sandwitch

by michael | 3rd Jan 11, 3:43pm 1294022600

So with china slowing down and NZ entering the twylight zone, then Australia would be the ham in the sandwitch

by iconoclast | 3rd Jan 11, 4:58pm 1294027126

In 2000 local body equity in assets owned was NZD $42 billion. Ten years later, in 2010 local body equities were $92 billion. Not bad. Deflation proof. Central Government should organise an IPO and float it on the NZX. Should be a winner. Recession proof.

http://www.localcouncils.govt.nz/lgip.nsf/wpg_url/Profiles-Local-Government-Statistical-Overview-Index

by Kunst | 3rd Jan 11, 6:03pm 1294030992

Our natural resources and primary industries are renowned for their purity and quality.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10697576

The real “Knock us up” - using any possible NZcapital, without thinking for the future of the next generation.

No word on sustainability - an economic structure - just muddling along - growth at all costs – written by fingers and then published by the stupid media.