Wednesday, 23 May 2012

Not more mercantilism?!

The NBR tells us about what David Parker has been saying about needing more exports:
Labour says a "bold" increase in exports is needed to lift New Zealand's poor economic performance.
I have pointed out before that Imports good; exports bad.

The NBR also notes,
"New Zealand must increase our exports to reverse our long-term decline," Mr Parker says.

"This is utterly essential to our wealth and incomes. Small, incremental and fiddly change won't be enough. We're going to have to be bold."

He says export growth could not rely on the food and agricultural sectors alone.

Rising unemployment, little jobs growth and wages failing to keep pace with inflation shows the country's financial settings are "out of whack".

He accused the government of failed economic management with stagnant gross domestic product, the country's credit downgrade at the end of last year and a widening current account deficit.
I hope Parker does realize that, roughly, exports equal imports and thus if exports go up imports will also go up and thus the current account may not change much.

The NBR continues,
"Every year that current account deficit is funded by extra borrowing from overseas and the sale of yet more New Zealand assets to overseas owners."
What about the possibility that we don't have a capital account surplus because we have a current account deficit but rather we have a current account deficit because we have a capital account surplus. That is, if overseas people want to invest in New Zealand we we are likely to end up with a current account deficit. There is also the question as to why we should care about "the sale of yet more New Zealand assets to overseas owners". If these owners use the resources more efficiently than a local owner then we want overseas investors to own them.

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