Part one of this post showed that S&P placed NZ on negative watch because of the savings gap, the huge (mainly private) net international debt and our under-diversified export profile (and consequent vulnerability). It all adds up to lenders perceiving potentially greater risks and seeking compensation through higher interest rates.
How did the Government react to the news? Did it front the issues and explain its “plan”? Not in your life.
Mr Key manages to contradict himself three ways in two paragraphs:
“Nothing has changed from our point of view, in fact if anything, our position looks stronger from our point of view (really?)…
We accept that we’ve had to take the earthquake on our balance sheet, accept tax revenues have been a bit weaker this year than we had anticipated…(corporate was 22.4% below 2010 forecasts, gst 15.8% below!)”
So… nothing has changed, we are stronger, but we are weaker. Classic. He must have been eyeballing three different journos and guessing they wanted three different answers, so why not try to please all of them at once?
The coup de grace is his attempt to pass it all off as Ireland’s fault. True, the Irish are in a bit of a bog, but lets assume S & P can tell the difference between the land of the long white cloud and the emerald isle.
Back in the real world, one thing is for sure, S&P won’t be amused if Messrs Key and English try to talk their way out rather than addressing the fundamental issues: how about trying to grow savings, diversify and lift exports, and reduce private international debt? Who knows, they could even turn it into a plan?