Key 'very worried about US economy'

Prime Minister John Key File photo

Prime Minister John Key says he is very worried about the United States' economic situation, and will use a visit there this week to determine where the US is heading in terms of its economic policy as markets wait for a possible third round of money printing from the US Federal Reserve.

That money printing has had the effect of devaluing the US dollar, meaning the New Zealand dollar last week rose to a fresh post-float high of 85 US cents on the back of better than expected NZ growth figures for the March quarter.

This morning, Key noted US Federal Reserve Chairman Ben Bernanke had not ruled out a third round of quantitative easing - or money printing - which had put a lot of pressure on New Zealand's exchange rate. He would not comment on whether the New Zealand dollar could reach parity against its US counterpart.

"But I am very worried by what you see in the United States at the moment. They've got essentially (a) zero (official) interest rate, so in terms of monetary policy, no room to move," Key said on TVNZ's Breakfast programme.

"In terms of fiscal policy - how much money you can spend - they're borrowing US$4.6 billion a day. Their (annual) deficit's NZ$1.4 trillion," he said.

Asked whether he would express concerns when meeting with US policy makers such as Bernanke, Key replied:

"It's not for us to tell the Americans how to run their economy. Really we'll go there and get a sense of what they think happens next. But they owe - they're debt ceiling's US$14.3 trillion - so a trillion is a thousand billion, just to give you a sense of how much money that is."

- INTEREST.CO.NZ