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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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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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Trevor.

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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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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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> 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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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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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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