Aftermath of debt a long-term fix
(8 August 2012 – New Zealand) Reserve Bank of New Zealand (RBNZ) governor Alan Bollard said the country may deal with the aftermath of the large increase in private debt for quite some time.
Dr Bollard said that throughout the past couple of decades, governments, firms, farmers and households across many parts of the advanced world took on large amounts of debt.
Rapid increases in debt had often arrived before a difficult period for the economy he said.
'Fortunately, New Zealand avoided the sort of costly systemic financial crisis that a growing number of other countries faced,' he said.
While government debt had increased substantially it remained low by international standards.
'But it is fair to note that we have suspected for a long time that New Zealand's private and external debts were too high to be sustained,' Dr Bollard said.
The accumulation of debt owed by individual firms and households, and borrowers disappointed that incomes and asset prices have not gone on rising as they expected and are 'clearly playing some role in the low rates of growth New Zealand has seen in productivity and GDP,' Dr Bollard said.
Rapid increases in debt had often arrived before a difficult period for the economy he said.
'Fortunately, New Zealand avoided the sort of costly systemic financial crisis that a growing number of other countries faced,' he said.
While government debt had increased substantially it remained low by international standards.
'But it is fair to note that we have suspected for a long time that New Zealand's private and external debts were too high to be sustained,' Dr Bollard said.
The accumulation of debt owed by individual firms and households, and borrowers disappointed that incomes and asset prices have not gone on rising as they expected and are 'clearly playing some role in the low rates of growth New Zealand has seen in productivity and GDP,' Dr Bollard said.
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