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How full is your piggy bank?

How full is your piggy bank?

Old Oct 14th 2010, 5:47 am
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Smile How full is your piggy bank?

Apparently we are saving our money now:
Kiwis have squirreled away billions of dollars of savings, spurring a slow economic recovery, the annual Crown accounts show.

Finance Minister Bill English has this afternoon released the Government's accounts for the year to the end of June.

He said the Government was surprised by a quick turn around in the level of savings.

"The whistle went, everyone realised the game was over," Mr English said at a media lock up this afternoon.

"New Zealanders have figured out that the consumption habits of the last decade were not sustainable.

"The size of that turn-around has been surprising and it's been more rapid than we might have expected."

The accounts showed that in the year to March 31 this year, about $6 billion had been saved by households. At the same time, household consumption fell from 64 per cent of GDP in 2007 down to 62 per cent this year.

The new savings drive was bad news for the retail sector.

"It does confirm that the recovery will not be retail led or consumption led," Mr English said.

Kiwis had been "addicted to debt" borrowing more against their mortgage to fund overseas holidays and flat screen televisions.

"The growth in credit was geting up to 15 per cent per year in an economy that was growing at 2 per cent."

The books showed operating balance before gains and losses had deteriorated to a deficit of $6.3b.

The recovery in world financial markets boosted the large investment funds (NZ Super, ACC and EQC) to recoup some of the losses sustained in the Global FInancial Crisis.

The affect of the Canterbury earthquake, which had "a devastating impact on the afected communities" was yet to show in the accounts, but was expected to have an impact in the December update.

The strength of Australia and China supported New Zealand's recovery.

Strong demand from China led to a rapid recovery in commodity prices and an improvement in the terms of trade.

The domestic economy was showing "cautious growth" with "subdued labour markets".

Crown expenses remained flat but tax revenue declined by $3.9 billion, causing continued operating deficits.
All good new really.

Saving and investing will help New Zealand a lot as long as governments can lock investors out of spending on stagnant assets that don’t have a productive output (i.e. property) and entice them into business with a future. Let’s hope this saving and investing thing really gets going within the next generation.

As Lee Kuan Yew* said recently “…We cannot offer our next generation any fixed formula for success, or even any set goals in life. They will face new circumstances and problems. They will need to think through and work out their own solutions. But we must equip them with the basic attitudes, values and instincts...”

*For those who don’t know Lee Kuan Yew was Prime minister of Singapore 1959 to 1990 and saw his natural resource less nation go from a third world country to being ranked 4th in per capita income by the IMF and World Bank, 11th in quality of life Index all in about 40 years . So he is well qualified to talk about rapid progress in economy and quality of life . Lets hope we can take some wisdom from their strategy.
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