That is the story for this, that and the fact that our stock of debt is still elevated.
My view of where we are heading has been heavily downgraded over the past week. NZ policy makers have done a great job, the government and the RBNZ have been sensible. NZ households have worked with what they’ve been given, and our businesses have responded to changing external conditions.
But Europe, and to a lesser extent the US, are mammothly incompetent. We’ve now reached a point where it looks like these nations are pushing the world into a crisis – a slow moving train wreck type of crisis. Hopefully, someone wakes up and taps the brakes soon.
On the note of the downgrade Fitch said:
New Zealand’s high level of net external debt is an outlier among rated peers – a key vulnerability that is likely to persist as the current account deficit is projected to widen again, reflecting a structural savings/investment imbalance.
This is a structural issue we should indeed chat about more at a later date.
Update: List of feedback on Rates Blog.
Update 2: Off goes S&P.