Understandably enough, the World Cup has a virtual monopoly on public attention at the moment. Yet even that cannot totally distract from a string of bad economic tidings. When the winner of the Webb Ellis Cup is finally known, some grim realities will have to be confronted. In the span
Editorial: After Rugby World Cup comes harsh reality
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While this country's government debt level is relatively low, household indebtedness, a legacy of the property boom, is a different story. To a degree, the rating agencies' decision reflects an impatience with the Government's moves to address that. Some fund managers were quick to suggest this should be the catalyst for KiwiSaver to be made compulsory. While there is a strong strain of self-interest in this, it does not necessarily invalidate their argument.
Clearly, to meet the rating agencies' concerns, New Zealand must lift its savings. A compulsory KiwiSaver would create a bigger domestic borrowing pot, thereby reducing this country's vulnerability. It must also hope that the exports which have underpinned its buoyancy, continue to flow. In that respect, the rating agencies' declarations could actually help by lowering the exchange rate. There is a sizeable raft of downside risks, however.
If the situation in the US and Europe deteriorates further and a crisis of confidence envelops them, their demand for imports, including those from Asia, will slump. In that scenario, there would be an inevitable flow-on to this country's exports to Asia, and a reduction in the price for commodities. Further problems in Europe could also raise funding costs for New Zealand banks, leading to higher rates for borrowers.
As yet, there is no sign of a 2008-style panic that would mean such fears were realised. But it hardly augurs well when a long period of global stagnation is the best option on the block.