No it’s not a virus. It’s our dollar surfing on a dumper. Here’s how Neville Bennett describes it:
There is increasing evidence that New Zealand is ailing. The symptoms are a high exchange rate, excessive foreign debt and a decline of the manufacturing sector. This is often called the Dutch disease which is defined as a development that results in a large inflow of foreign currency, which in turn causes an appreciation of its currency, making its manufactures too expensive for others to buy.
Gareth Morgan also writes about it in today’s Herald.
The most concerning outcome is that New Zealand will swing on the end of an unsustainably high currency until the economic damage wrought warrants a major change. That damage would come via a hollowing out of our non-commodity producing businesses, no correction in our household savings rate and in time, a balance of payments/external debt crisis as those factors conspire.
Any amount of commentators from the Prime Minister on down tell us that all is well, we are on a path to growth (eventually), and nothing can be done about our dollar that has risen from a little above 50cents US in early 2009 to over 80cents now. This volatility also makes it impossible for borrowers to plan for future growth and expansion. The dollar’s current level also provides a headwind for our economy according to Bill English.
Treasury are holding a conference later this week on macroeconomics. I don’t know whether Neville Bennett and Gareth Morgan will be there – I hope so. It is high time that we got some fresh thinking into our economic planning. The neoliberal recipe the 1980s Treasury adopted from the monetarist Chicago school has not stood us in good stead.
Neville Bennett does not believe nothing can be done. He offers some ideas, supported by the IMF. We need more thinking like this.