Forum Archive Index - December 2000

["hugh webber" <hugh.webber@clear.net.nz>]

I would have hoped for greater economic literacy in this forum,
its unfortunately obvious very few have studied economics - I
used to have hopes that at least Economics 101 would become
compulsory.
Item: NZ has a large and persistent Balance of Payments deficit
on Current A/c. (groan, I suppose I have to explain what that is).
Item: The lower the NZ $ then the lower the price to travellers from
overseas to take a holiday here including the airfare to them of getting
here.

There is currently a promising export led expansion in NZ which is also
starting to correct our balance of payments problem - its actually due
to the lower NZ $ and not to exogenous independent magic.

I suspect Philip T and I must be talking at cross purposes and he didn't
really meant what he seemed to say, at least not without some
qualifications.

If we are going to have a succession of economic bushwoodsmen
telling us that the solution to NZ's problems is a higher NZ $ then I 
really do despair.
I recall Muldoon used to claim his hobby was economics and that he
was very good at it....
In 1984 he was asking NZ diplomats to use their personal credit cards
to pay for overseas Embassy expenses as he had stuffed it up somewhat
and continually overruled Treasury advice.

It is necessary for NZers to be flexible and inventive to adjust to the
lower
$ NZ import costs - the old cost plus mentality is no longer tolerated by
our 
customers. There are short term freaks when the NZ dollar falls before the 
adjustments come through e.g. in the first months following an NZ currency
fall when you measure NZ imports they are higher because of the currency 
measurement effect while exports are lower due the same currency 
measurement effect. This doesn't mean the devaluation is a failure; it
means
there is a lag before overseas customers start buying more of our cheaper
goods and services and a lag before importers stop bringing in so much
of the more expensive imports.

If Air NZ thinks it will compete on a cost plus mentality in this day and
age -
its doomed. Sell now.



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