March 22, 2013
Like much of the world, New Zealand's economy is still feeling the lingering consequences of the global financial crisis and the hang-over of its own asset price bubble. The economy is recovering slowly. In the last few years, households have spent cautiously and paid down mortgages. This was an adjustment that needed to happen. But net foreign liabilities are still very high and recent credit growth raises concerns that the adjustment has not been enough. Major action will be needed to contain the ageing-related growth in government spending that is about to hit us, and lift economic growth. Steps have been made in the right direction, but further reforms are needed. New Zealanders need to be prepared to make sacrifices in the short run to make progress in the long run. The longer we delay action, the bleaker our prospects.