The financial problems in the US are a worry not just to the United States. Many countries throughout the world will be affected. How will New Zealand be affected? Both the Prime Minister, Helen Clark, and the leader of the National Party, John Key, said that New Zealand should not worry too much because we are not so dependent on the United States.
However, share market prices and the New Zealand dollar went down today. A weak New Zealand dollar makes the cost of imports higher. Oil will be more expensive. Another problem will be for those needing to borrow money. Our banks borrow money from overseas because New Zealanders do not invest enough money. We are not good at saving. Overseas credit will cost more. This means that our banks will have less money to lend to house buyers, to property developers or to business people. Already, the number of houses being built is the lowest for eight years. Builders are facing hard times. If business people cannot borrow money, they cannot increase their business easily.
On the other hand, tax cuts promised by the Minister of Finance, Michael Cullen, start from tomorrow but they are not big tax cuts. For people who earn less than $35,000, they can expect to get another $12 a week. Meanwhile electricity prices in Auckland, Wellington and Dunedin are going up, around 10%. The increase in the South Island is partly because of increased electricity use in dairy farms but also because of the breakdown in the Cook Strait cable between the North and South Islands. One of the two cables is in poor condition – it is 43 years old – so the other cable has to carry all the electricity between the islands. Transpower will spend $672million to repair the cable but that work will not finish until 2014. |