NZ can cope if US fails to agree on debt limit: English says

NZPA

Wednesday 27th July 2011

Finance Minister Bill English is confident New Zealand will be able to cope with any fallout that would result if politicians in the United States fail to reach an agreement on raising the US debt limit.

A combination of negative scenarios could be imagined such as a continually rising New Zealand dollar and dropping commodity prices, which would be "pretty negative" for this country, English told Radio New Zealand.

"But we have been remarkably resilient through the last two or three years.

"It's all been hard work up to now, with the global recession, the earthquake, the big debt problems from the last 10 or 15 years that we have to deal with, and we've dealt with them pretty well.

"So, you know, I'm confident that whatever the global economy throws at us we'll be able to deal with it, even if it takes a while to come right again."

In the US, President Barack Obama's Democrats and their Republican rivals seemed further apart than ever early today (NZ time) in the debt limit impasse, with Wall Street bracing for a looming US default and credit downgrade.

One week before a deadline to act, the two sides pursued competing budget plans that appeared to have little chance of winning broad congressional approval. There was no compromise in sight to raise the nation's $US14.3 trillion debt ceiling by August 2 to avert a default that could trigger global financial chaos.

The White House threatened to veto legislation which Republican leaders in the House of Representatives were trying to line up enough votes to pass.

In the face of the chaos in the US, the NZ dollar overnight soared to a new post-float high above US87.4c.

English said the NZ dollar was being driven higher because this country was starting to be seen as something of a safe haven.

"We've got a solid government that's making good decisions. An economy which has positive prospects, and that is now almost unique in the developed world. It puts us alongside Germany, Australia to some extent, Canada, and that's about it," English said.

He had given up guessing how high the NZ dollar could go.

"It makes our job of rebalancing this economy more difficult, but it is an indication that relative to other developed economies we are seen, by others, as being in pretty good shape."

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