Friday, February 10, 2012

The problem

Stuff reports that Australian banks took $3 billion in profits overseas in the last financial year. To put that in perspective, its roughly 1.5% of GDP, or about a third of our balance of payments deficit. And these profits aren't particularly exceptional; they do this every year.

This isn't just a matter of poor economic statistics - it has real effects. That's $3 billion which will be spent or invested in Australia, rather than New Zealand. Its $3 billion which will be funding startups, boosting innovation and raising productivity there rather than here. Which means that its $3 billion which is boosting their long-term living standards, rather than ours.

The big problem with New Zealand's economy has always been a shortage of domestic capital for reinvestment in economic growth. And this is why. We have a permanent shunt wired into our economic veins, sucking out the capital we need to develop and taking it overseas.

This is why we need to control our own economy. And its why we shouldn't sell state assets, even partly - because it will just make this problem worse.