Sharechat Logo

Keep South Canterbury in perspective: NZIER chief economist

Tuesday 31st August 2010

Text too small?

The biggest danger from the South Canterbury Finance receivership is overblowing its importance to the wider economy, sparking an unnecessary impact on consumer and business confidence, says the New Zealand Institute of Economic Research’s principal economist, Shamubeel Eaqub.

“Farm debt in New Zealand is $47 billion, on a total farming business of around $120 billion,” he said. South Canterbury’s liabilities, at $1.6 billion, were equivalent to just 3.4% of total farm lending, and just 1.3% of national farm assets.

By comparison, SCF’s $1.6 billion in total liabilities – and a likely net Crown exposure of perhaps $700 million – was less of an economic shock than the high profile of the issue might imply, Eaqub said.

“We need to keep this in context, relative to the stock of debt. For the local economy, particularly around Canterbury and Timaru, this will have some big financial and confidence impacts.

“But it’s the confidence aspect that’s important, and the potential loss of confidence through to investing in general that I worry about. I don’t think there needs to be,” Eaqub said.

“Our banks are pretty strong, they are well rated, and have plenty of cash. Depositors (in SCF) are guaranteed, so there won’t be a spending shock.”

Eaqub cannot be accused of trying to talk the situation up. NZIER today published a gloomy outlook for the New Zealand economy over at least the next year. The only bright spots are that unemployment rates should remain stable and interest rates will rise more slowly, as the pace of both the local and global economic recoveries slow.

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

VCT - Operational performance for the year ended 30 June 2024
Challenge to banks the way to go
Bigger returns or lower risk?
NPH - Director Appointment
July 19th Morning Report
Wellington International Airport Ltd (“WIA040”) - Maturity
Devon Funds Morning Note - 18 July 2024
CNU - Commerce Commission releases draft Price Quality decision
Precinct FY24 Annual Results and Webcast Details
Scott Technology appoints new CEO