John Key MP National Party Finance Spokesman

21 December 2004

Balance of Payments similar to Asian crisis period

"It is extraordinary that our current account position is so bad when New Zealand commodity prices and the terms of trade are so high," says National Party Finance spokesman John Key, commenting on the current account deficit reaching 5.8% of GDP.

"It is the worst in four years and at similar levels to those seen during the Asian crisis," he says.

"A large Balance of Payments deficit was understandable when Asia was in financial meltdown, but now the world economy and our commodity prices have been enjoying strong growth. If this is what we get at the peak of an economic cycle, then we had better be worried about what happens when export prices fall.

"Treasury is forecasting the current account to continue to deteriorate to 6.4% of GDP, and the Government is in denial, preferring not to think about it. "We have an economy driven by a strong world economy and thus high commodity prices, a property boom and massive increases in public spending.

"Those demand pressures are creating a huge deterioration in the Balance of Payments, and this Government is pouring fuel on the fire with its undisciplined approach to public spending," says Mr Key.

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