On our 40th…


The below chart is in honor of our 40th anniversary, one that we have all forgotten about. Yes I'm talking to you New Zealanders, how could we forget.. it has been 40 years since we last made money as a country:      

(Click image to enlarge)
NZ current account 40 years negative
40 years! Already! It almost seems like yesterday! Shouldn't we be broke by now?

You would think right...

The current account gets reset every year so we can have another go, but the money we borrowed in a deficit year does not get reset, it stays… it grows with compounding interest and each additional year in the red.

The below chart shows the cumulative effect of our current account deficits:
 (Click image to enlarge)
NZ Current account Cumulative debt
(PS: don’t confuse Government only accounts with the total countries accounts “Current account”)

It is important to note that the "current account" takes into "account" all the incomings and outgoings of our country. Even when we actually do have a trade surplus we are still going backwards these days due to interest payments on our accumulated debt.

At our 40th I have a serious question... if we don't turn that line around in the above chart what will happen? Can it keep on going down forever, I mean it lasted 40 years so far...

No, no it is not logical that we can keep borrowing money to infinity, if we did then money would be worthless.

Much of the "western world" is facing this issue. 40 years of no global currency backed by gold (USD 1971), 40 years of not paying our way.

Can’t we blame the Government for this?

No, we worked together on this, we encouraged and supported borrowing especially on housing, we loved bidding up house prices against one another with borrowed money, we were happy getting into debt and the government was happy getting tax from the imported funds, GST on our borrowed money every time we spent it, income tax from builders, carpet layers, painters and bankers.

40 years.. it's been fun but a messy break-up is on the cards.

(Data sources RBNZ and statistics NZ, I noticed that current (and even historic??) numbers do get revised from time to time so these totals are approximate, but the trend should be clear)


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