We return to comments we made on Monday.
Why, if our hand was forced by the Aussies did we not adopt the same policy as the Aussies?
In particular - why did we not match Australia's guarantee for bank lending in the international wholesale market?
Those countries that are running large current account deficits - NZ, Australia, US etc are in competition for an increasingly scarce amount of funds on the international wholesale markets. Most of the money on offer is from Asia. Now if you were an Asian investor with $100 million to invest who would you invest it with? An Australian bank which has this loan guaranteed by the Australian Government, or a New Zealand bank that has no guarantee from the New Zealand or any other government? The answer is obvious. The money will be loaned to Australia. Why would you take a risk on New Zealand when there is no risk in lending to Australia.
Given the fact that even with 4% contributions to Kiwisaver, we are a nett borrower economy. We are not at present (maybe Key's 40% plan for the NZSF will help right this) able to generate the funds we need to keep our economy working from domestic savings. So we are dependent on a funding stream that looks as though it is about to dry up. Before too long the banks are going to have to literally stop lending. And this will mean chaos across the economy. New activity will stop and existing loans will be affected also. Don't expect your fixed term loan to be rolled over when it expires, even on your house.
Rather than take pot shots at John Key's New Deal vision commentators and serious journalists might like to explore whether we are right or wrong in this post.
If we are right, it doesn't matter whether Clark has politicised this issue (we quote from today's editorial in The Press)
More worrying was the way the Prime Minister, Helen Clark, chose to play politics with the announcement of the scheme. She failed to brief the National Party, or anyone else, beforehand and made the announcement at the launch of Labour's election campaign. This was unforgivable. It makes the scheme look like merely another device to make Clark appear decisive and on top of the situation. In fact, that kind of chicanery does the opposite. It makes her look shifty and manipulative. The present crisis is too serious a matter for anyone to be using it to engage in political posturing.
This is the biggest policy mistake made in this economy for many, many years.
Or was it a mistake????? Think about it......It's about trust...
