KEY POINTS:
Batten down the hatches if you can. Alan Bollard is shortly expected to don his kamikaze suit and point the New Zealand economy on the flight-path for what could be one almighty crash.
The Reserve Bank's board knows full well that Bollard's strategies could push the economy to its tipping point - that perfect storm where a combination of extortionate interest rates and punishing exchange rate puts exporters out of business and results in a wave of bankruptcies and job losses.
Look at the headlines over the past week: "Spending binge unrelenting", "Job figures put heat on rates", "Not one but two rate rises ahead" ... The warning bells are sounding loud and clear.
But missing in action are the headlines that tell the counter-story - that much of the inflationary pressure in the economy has been caused by a surge in state spending.
The headlines we need to see much more of would run like this: "Government keeps spending while Reserve Bank wrings its hands", "Reserve Bank Governor wimps out on publicly tackling Finance Minister's profligacy", or "Bollard resigns in protest at Government's failure to come to party on inflation."
Around the traps the well-connected Reserve Bank board members are letting it be known to the business community that they are frustrated at the Government's unwillingness to put a clamp on its own spending. Unfortunately that message is not being heard at the Beehive. Nor is it being telegraphed clearly enough by Bollard. His calls to cool lending have had little effect.
The Reserve Bank's single-minded focus on house price inflation carries a monstrous risk. Domestic borrowers will already be feeling pain from repeated interest rate rises. At some stage it will simply get too expensive to borrow. And unfortunately, the business sector that employs many New Zealanders will also feel the pain.
If Bollard raises interest rates again next week, as most economic pundits are predicting, the squeals of outrage from exporters will quickly drown out any of the soft fuzzy feelings engendered by the Government's PR push on Export Year.
After all, this was the year which the Government declared a time for a rallying call to New Zealanders to embark on an entrepreneurial push offshore.
Finance Minister Michael Cullen has been lobbied to include some goodies for exporters in his upcoming budget. But they will be wasted if the economy remains pointed in the kamikaze direction.
With the New Zealand dollar rocketing along at around US74c, those businesses with export profiles will soon start to curtail any plans to ramp up staff numbers and take on more debt to fuel their expansions into offshore markets.
I spoke to a number of chief executives this week who were already doing just that: putting their businesses on to auto pilot and postponing expansion plans as they prepare to ride out the storm.
The problem they face is two-fold. Already they are paying hefty premiums for business loans. But once the official cash rate busts its current 7.50 per cent mark, and pushes towards the 8 per cent mark central bank insiders say is essential to bring the housing market to heel, the business rates will start to look extortionate.
Asset price inflation, as we've seen yet again from the latest house price statistics, is still rampant.
But not so rampant as the Government's own spending, which has spawned a huge new superclass of well-heeled policy advisers and consultants.
If the Government truly cared it would get its pruning knife out quickly. Don't bet on it.
