An economic diagnosis: what's wrong with NZ

These are extracts from a speech by a leading economic thinker. See whether you agree.

 "For almost 40 years, since 1973, we've spent more on imports than we've earned from exports.  The difference we've had to borrow from foreigners. 

 "Now there's nothing inherently dangerous about using the savings of foreigners to supplement our own savings.  Not if that money is used to increase the productive capacity of our economy.

 "But it's not being used for that.  It's being used to finance a spending binge off the back of over-inflated house and farm prices.  We're using it to buy things we haven't earned.

 "Today, our net debt to foreigners is about 90% of GDP. That's as bad as in some of the most debt-burdened European countries.

 "And on present policies, there's little chance we'll get that debt down by much.

 The risk is that financial markets could become concerned at New Zealand's vulnerability.

 "They could decide to stop lending to us - and they could do it quite suddenly.

 "Even worse, they could start demanding some repayment. 

 "That would force a painful adjustment on all New Zealanders similar to that facing several European countries today.

 "In its third term, the Clark Labour Government ....embarked on a massive increase in government spending.  And much of that was of very poor quality. 

 "So what has this National Government done to reverse this wasteful spending? Sadly, not much.

 "As a result, government debt is growing fast.

 "Treasury predicts that on current policies the ratio of government debt to GDP will reach 220% by 2050. 

 "How bad is that?

 "Well, in the late eighties and early nineties, both Labour and National Governments got the jitters when our public sector debt blew out beyond 50% of GDP. 

 "Today, the United States is right to be deeply worried about a government debt-to-GDP ratio of almost 100%. 

 "We just can't afford to stay on our current track.   For the sake of our children and grandchildren, we need to manage our economy better.

 "New Zealand's economic decline over the last half century is one of the steepest on record anywhere. 

 "By the early fifties, our living standards were still fourth or fifth in the world.

 "But today, we've fallen to near the bottom of the 30-nation group of developed countries. 

 "Because of this, more and more New Zealanders have voted with their feet. They've left New Zealand.  Most of them have gone to Australia, where they help to drive the Australian economy forward. 

 "Reversing that decline won't be easy.

 "To use a phrase sometimes used in another context, we dare not settle for the soft bigotry of low expectations that says "ah yes, but New Zealand is a nice place to live". 

 "Of course it is. 

 "But we need to transform our economic destiny too.

 "We need to give our people a reason to believe that we can once again offer a standard of living similar to that in other developed countries - as we had only 50 years ago. "

 The speaker is Don Brash who gave this speech in Auckland earlier this week.