Perhaps as much by good luck as good management, New Zealand escaped the worst of the global financial crisis. Strong corporate and government balance sheets; limited penetration of “Low Doc” [Liar’s] loans, CDOs and other exotica; strong soft commodity prices; relatively rational and responsive regulators - these and other factors isolated us from the worst of the crisis, although not from the subsequent (and still current) malaise.
But it remains true that we had, and have, some terrible imbalances that threaten our already teetering position in the clubs of richest nations. In particular, we are singularly ineffective at creating the savings needed to support our aspirations and at building the institutions necessary to allocate the resulting capital to its most efficient uses.
The result: sickly growth, obdurate current account deficits, large holes in the ground in Queensland, investment losses, bailouts, moral hazard, mistrust, withdrawal of participation.
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