AUGUST 10 2019 LISTENER 612007-2008. The global finan-
cial crisis was the bullet that
grazed rather than pierced our
economy. Activity had been
humming at an average of
3.5% annual growth – albeit
fuelled mostly by housing and
private spending – when in
2008, banking giant Lehman
Brothers collapsed and the
world’s financial system
plunged into turmoil. The US
and many other developed
countries suffered further
banking failures, housing-
price collapse and crippling
economic downturn, and
resorted to austerity measures
and controversial experiments
to artificially expand the
money supply. Kiwis braced
for the worst. A summer
drought had already crimped
our dairy and other agricul-
tural production, and fuel and
food prices had begun to soar.
But because our Australian-
owned trading banks had no
exposure to the complex and
often value-hollow financial
instruments that Lehman
and many others had devised
to try to bolster their books,
our economy had the ballastFinancial
crisis
to withstand the downturn
without emergency measures.
John Key’s Government won
plaudits for resisting austerity
and liquidity tinkering, though
some economists worried that
New Zealanders’ high levels of
private debt made us specially
vulnerable to the recession.
Mum and Dad investors were
particularly hard hit by a spate
of finance company collapses,in which poor governance and
management, criminal miscon-
duct, deficiencies in disclosure
and a lack of understanding of
risk were highlighted as major
causes. High-profile pros-
ecutions and investigations
followed the failings of compa-
nies such as South Canterbury
Finance, and Bridgecorp.
Although there’s mounting
apprehension that globalconditions are again condu-
cive to a financial crisis, the
Reserve Bank’s figures sug-
gest we’re no more vulnerable
to one now than we were in- Household debt has
risen 55% in the past decade,
but it’s no higher relative
to the economy’s size or to
household assets or incomes.
The debt is also cheaper to
service than it was in 2008.
Relationship with Oz
Relations between us and our nearest neighbour, Australia,
run hot and cold, with sport and politics typically at the
centre of what we think about each other. New Zealand
has the upper hand in rugby clashes, having racked up
more than three times as many wins as Australia, and had
the satisfaction of claiming the Netball World Cup by beat-
ing Australia by one goal in July. In cricket, too, we outdid
Australia in the 2019 World Cup. In foreign policy, however,
Australia is making all the running, steadily clamping down
on New Zealanders’ residency rights across the Ditch. The
terseness that has crept into transtasman political feeling
was expressed eloquently by former Prime Minister David
Lange when a journalist asked him for “a word on Aus-
tralia”. “Wombat!” was his reply.