Overseas borrowing a ‘vindication’
By
BRENDON BURNS
in Wellington
Massive private overseas borrowing and capital outflows were claimed by the Prime Minister yesterday to be a vindication of the Government’s economic policies. Mr Lange was responding to week-end descriptions by a leading economist, Mr Len Bayliss, that New Zealand’s overseas debt was at a crisis level.
Mr Bayliss said private sector overseas debt was actually $l4 billion, not $6 billion as shown by official figures.
When added to combined Government and State corporation borrowing of $27 billion, a total of $4l billion in overseas debt was reached. That figure was 84 per cent of everything produced by the economy (gross domestic product). Mr Bayliss said overseas financiers could come to view New Zealand like Latin American countries which could not pay their debts. But speaking after yesterday’s Cabinet meeting, Mr Lange said overseas lenders provide funds to
private companies on the basis that they could repay. He said they would take into account New Zealand’s economic climate. “It is, in fact, a vindication of our economic policy.” Mr Lange had been briefed before he arrived at the news conference that there had been no adverse reaction on financial markets to Mr 1 Bayliss’ comments. He said this supported the Government’s view that private borrowing was being used by New Zealand companies to buy assets which produced returns for this country.
“There is another credible way of looking at it which seems to have been supported by the international financial community this morning because ’ today the markets were positive. There was no collapse of the dollar,” he said. Asked how the Government felt about the size oi the debt, Mr Lange said, “I think it is perfectly manageable.”
The Prime Minister said the Government itself had not borrowed any
extra net amount since it took office, except where this went into reserves and to refinance existing “think big” debt on better terms.
Earlier, an Australian director of the Americanbased investment bank, Salomon Brothers, also drew a distinction between public and private debt. Speaking on Radio New Zealand, Mr Trevor Rowe said private borrowing was generally used for investment and production. Public debt was often used for consumption. Mr. Bayliss, spoken to last evening, did not want to be drawn into a political debate. But he said whether the debt was public or private it had to be serviced. “Our debt statistics are just deplorable and the subject of considerable overseas concern.”
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Press, 7 April 1987, Page 3
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410Overseas borrowing a ‘vindication’ Press, 7 April 1987, Page 3
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