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Comments on: Let’s be careful judging savers http://www.tvhe.co.nz/2013/04/16/lets-be-careful-judging-savers/ The Visible Hand in Economics Wed, 17 Apr 2013 03:41:00 +0000 hourly 1 https://wordpress.org/?v=6.9.4 By: Matt Nolan http://www.tvhe.co.nz/2013/04/16/lets-be-careful-judging-savers/#comment-40725 Wed, 17 Apr 2013 03:41:00 +0000 http://www.tvhe.co.nz/?p=8550#comment-40725 In reply to Blair.

Hmmm, the current account deficit is currently elevated in part due to rebuild related imports – capital imports spiked sharply through the middle of last year as equipment was brought in here for the rebuild. So that is one thing to keep in mind.

Also, the rebuild is essentially investment – it illustrates what is going on with the S-I imbalance pretty nicely. It also illustrates why a sudden jump in investment demand sort of forces the central bank to lift the OCR to keep inflation on track, which makes it a neat example.

The key point here is for analysts, and journalists, to keep the principle of savings and investment in mind when looking at this – and to note that we need a clear idea of the market or government failure behind it, before we can really say much about the numbers!

]]> By: Blair http://www.tvhe.co.nz/2013/04/16/lets-be-careful-judging-savers/#comment-40723 Wed, 17 Apr 2013 03:18:00 +0000 http://www.tvhe.co.nz/?p=8550#comment-40723 “[W]hen economists are talking about savings issues they are saying that our persistent large current account deficits, with a range of other factors that seem unusual in New Zealand, provides a situation that we should analyse”.

It is interesting that Graeme Wheeler didn’t mention the current account in his recent speech on housing. Yet, if investment recovers to its pre-GFC trend in order to fund the rebuild of Christchurch and Auckland, the current account deficit will be 10%, assuming constant savings. This is getting into powder keg territory.

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