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Overseas Debt

Overseas Debt. Overseas Debt. If New Zealanders are spending more overseas than they are earning, what has happened to the a mount we owe as a nation overseas?. Overseas Debt. Study the above table and make 3 comments about New Zealand’s overseas debt. You may complete this in pairs.

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Overseas Debt

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  1. Overseas Debt

  2. Overseas Debt • If New Zealanders are spending more overseas than they are earning, what has happened to the amount we owe as a nation overseas?

  3. Overseas Debt Study the above table and make 3 comments about New Zealand’s overseas debt. You may complete this in pairs.

  4. Where do you think Co-orporate debt is arising from? • What is the private sector borrowing money for? • The debt arises from two major sources • Banks borrowing to fund investments in housing, and our spending on credit • Business’s borrowing to invest in capital goods Which of these two sources of borrowing do you think will most likely be repaid back in the future?

  5. Overseas Debt • Business’s only borrow money for an investment if it was likely to earn a return > the cost of borrowing. • Why do we need to borrow $ from overseas? • Think about the circular flow diagram. Where does the investment $ come from? • We need to borrow these sums of money overseas because as a nation we save too little. Therefore banks have little choice but to borrow the money they need for domestic borrowers from overseas sources.

  6. Statement about NZ debt. • Article

  7. Low rates of Savings • Low net foreign assest position. Nzlanders owe a lot overseas but don’t own a lot of assets overseas.

  8. Page 2 • High Current account deficits are associated with • Average levels of investment • Low saving levels. • The Economic uncertainty has increased Saving levels but these are expected to be temporary • An increase in saving levels is needed.

  9. New Zealand’s International Investment Position • The International Investment Position (IIP) records the balances of the assets and liabilities held by New Zealanders overseas and the assets and liabilities held in NZ by overseas residents. • At the moment we have a lot of liabilities overseas and not many assets. • This means NZ’s IIP is not looking very good at the moment.

  10. Exercise Books page 95-100

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