NZ Green Party
Putting it on the national credit card

The trade deficit hit $1.9 billion today.  Which using one of those ‘bringing it down to a scale you can comprehend’ metaphors means that you owe someone overseas $475 dollars for the stuff you bought this year.

You can add that debt to the rest of the money you own from similar size debts you clocked up last year and the year before. In fact the last time we sold more than we earned for the year was back in 2002 (incidentally also the last year we decreased the amount we imported). Since then we have increased our our exports by nearly $8 billion. Sadly though, on the other side of the ledger, we have increased our imports by nearly $13 billion all during a period when our economy was meant to be booming.

Now there are two sides to this equation.  The first, which relates to the $3.6 billion of stuff we sent overseas last month, you will undoubtedly hear for a range of ‘mainstream’ economists and politicians.  It says that we are not exporting enough stuff and that we need to act to ‘transform’ our economy so it is more competitive and connected with global markets.

The second, and rarely mentioned, part of the equation though is the $3.8 billion of stuff we imported last month. Don’t expect to hear any mainstream economists or politicians asking how much of that stuff could we have made here, giving jobs to New Zealand workers and saving the carbon emissions from importing it?  Or how much of the time could we have reused, repaired or recycled some of that stuff already in existence rather than buying a new thing?

Most of the gap between imports and exports is now related to the rising price of oil and petroleum products.  While oil has fallen from its US$147 a barrel high last month to below US$130 at present that is still astronomically high compared to US$60 or US$70 a barrel price it was selling for this time last year. If oil can fall nearly US$20 a barrel and still be skyrocketingly high that should be the signal we need to do something about our economy’s reliance on imported goods, especially oil.

18 thoughts on “Putting it on the national credit card

  1. This is a serious problem. Unfortunately, the policies being promoted even by the Greens don’t necessarily help.

    Energy-saver lightbulbs for example. If we spend our money on electricity, it stays in NZ. If we spend it buying imported expensive lightbulbs, it leaves NZ.

    New fuel-efficient cars. We would be much better just maintaining the ones we have, but instead people promote fancy new ones to supposedly reduce emissions, despite the fact that this increases off-shore emissions and worsens the trade deficit.

    If we import expensive biofuels, we are harming the trade deficit (producing biofuels here would be positive of course, if we can do so sustainably and in high enough quantities, which is doubtful at present). Coal to gas however would be good for the economy, because we produce it here.

    Kyoto is particularly bad for the trade deficit, as emissions from NZ are penalised, ultimately depressing the local economy while promoting imports, which are not penalised however inefficiently they are produced.

    I do agree with much of what you have posted here. We should be buying local produce wherever practical rather than importing, this is logical. I am just applying the logic you are using to the sort of solutions often promoted for larger-scale environmental issues. And the solutions often exacerbate this problem in my opinion.

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  2. GLS (normal incandescent) light bulbs are also imported. CFLs last about 5 times as long so we have to import 5 times as many GLS bulbs, and that money also leaves New Zealand.

    Some electricity is generated using oil. That oil may not be imported but could replace oil that is imported. Cutting electricity use would reduce our oil imports and the payments for that oil. So would increasing generation from renewable resources.

    We cut back on some of our industry when the lakes are low, reducing their exports. Generating more electricity from renewable resources or cutting back on other electricity consumption would allow more exports from these industries.

    Trevor.

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  3. Mr Dennis – are you promoting the Cuban solution? I have to say it has some things going for it!

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  4. No toad, even the Cuban solution requires someone to buy the bulbs! Trevor, although both bulbs are imported the energy savers are several times the price of incandescants, so the total money sent off-shore is greater with CFLs.

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  5. # Mr Dennis Says:
    July 28th, 2008 at 8:02 pm

    > Trevor, although both bulbs are imported the energy savers are several times the price of incandescants, so the total money sent off-shore is greater with CFLs.

    But the energy-saver bulbs last many times longer than the incandescent ones, so the cost of the bulb per hour of use is about the same, or even slightly less.

    And the generators that have to be put into the power stations to generate the extra electricity* for the incandescent bulbs are also imported, so the money sent off shore to buy and run the incandescent bulbs is greater.

    (*yes I know we had enough electricity to run the incandescent bulbs in the past, but cutting down the electricity used by light bulbs is a way to partially cancel out the consumption growth due to other factors).

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  6. It was very nice of Mr Dennis to give us an argument that illustrates how a change can have an immediate negative while having a positive longer term impact.

    If an ordinary light bulb costs $1 and an energy saver costs $6 but last six times longer then the immediate impact of banning ordinary lightbulbs will be a worsening of the trade deficit. However, once the short lived ordinary lightbulbs have all been replaced we would then go through a period when very few lights need replacing reducing the trade deficit below it’s original level. When the first lot of energy savers need replacing the trade deficit will return to it’s original level. Except for the reduction in imports costs for new electricity turbines.

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  7. Have you read ‘Golf Apocalypse?”

    Perhaps it is a little alarmist, but the point being that we are going to run out of oil soon, and no amount of bio fuel or solar alternatives are going to replace the massive amount of energy that we get from oil. Nothing (suitable) comes close. So the proverbial poo is going to hit the fan, in time, and it won be good when it does. We’re already seeing countries fighting for control of oil fields.

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  8. Surely that’s ‘Gulf Apocalypse’? Although golf will also be one of the first to go in an end of oil scenario…

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  9. The amount of solar energy available is truly enormous and more than enough to replace what we get from oil. The two problems are that we are not harnessing that solar energy fast enough, and it isn’t oil so we can’t store it like oil or put it in our vehicles.

    Trevor.

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  10. Heh, I thought “Putting it on the national credit card” was going to refer to National’s tax cut plans.

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  11. I think National’s economics would probably favour a Criscos sort of scheme StephenR: Something that seems kind of disappointing at Christmas time given the price you paid.

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  12. I guess we will continue to sell more of the family jewels so we can buy more overseas crap.

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  13. Kevyn:
    “It was very nice of Mr Dennis to give us an argument that illustrates how a change can have an immediate negative while having a positive longer term impact.”

    Reasonable analysis of the issue. However I will point out that an immediate negative but eventual neutral or positive effect may well be negative overall if you take interest and opportunity cost into account. And many lightbulbs aren’t used for long enough to even wear out an incandescent, let alone six. My point regarding lightbulbs was however the most easily refutable of my points.

    Anyone have any comments regarding the effect of Kyoto on our trade deficit?

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  14. The trade deficit is the least of our worries. Here are our debts at what is possibly the end of a record-breaking economic “boom”, in dollars and as a percentage of GDP (currently $178b):

    Consumer debt $13b 7.3%
    Mortgage debt $160b 90%
    Overseas corporate debt $201b 113%
    Government overseas debt $18b 10%
    Trade deficit $4.5b 2.5%
    Current account deficit $14b 7.8%

    If there is a recession, we will find out whether those companies that have borrowed so heavily have invested wisely, I certainly hope they have. A lot of the mortgage debt is owed to Australian owned banks (only Kiwibank raises most of its money locally), but on the other hand, the money loaned by the banks, paid to the sellers of houses, is mostly still in NZ (and hopefully has been invested wisely).

    Perhaps the most alarming figure is the current account deficit. I have seen some right-wing economic commentators argue that this is a sign of vitality (plenty of money coming in from abroad means we are seen as a good investment) but, no matter how well that money is invested, we still end up with foreigners owning a bigger and bigger slice. The list of countries with similar current account deficits are not good company to be in.

    One “solution” would be a crash in the NZ dollar, impoverishing us and leaving a mountain of debt to pay, but forcing us to stop living beyond our means. Any takers?

    Robert

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  15. Hurry up and crash NZ Dollar I have USD i need to bring back into the country. When I left NZ it was 39cents, I want it back down in the 60′s at least.

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  16. the trade deficit is hardly the least of our troubles, indeed it is ineluctably linked to all those other statistics.
    crashing the dollar would be a disastrous attempted solution though, it will only hasten the sale of the country to foreign owners

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  17. There’s a lot of confusion on the Green Party position here Frog. The Greens need to thrash out their priorities so they can get a consistent message across: sustainability, ecological harmony, values…. community, nature, urban design etc [not sure where the other stuff goes but they should be sideline issues... unless you think you have some system]
    http://antidismal.blogspot.com/2008/07/imports-good-exports-bad.html

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