The IMF theory of the bourgeois state, and its application to New Zealand

Jurriaan Bendien bendien at
Wed Nov 19 07:25:27 MST 2003

According to the New Zealand Herald,

"New Zealand's net liability position to the rest of the world is around
[NZ]$100 billion or 75 per cent of GDP, half of which is in the banking
system. About 30 per cent of New Zealand banks' balance sheets is funded by
non-residents. "There's a macro-economic issue about the longer-term
sustainability of household debt which we are aware of but which goes
somewhat beyond the mandate of FSAP [IMF's financial sector assessment
programme]," [the head of the IMF investigation team] said."

But now wait for it, think about this, comrades:

"But the overall vulnerability [she said] is not as much as in other
countries with a similar debt structure because the debt goes to households,
not the Government. It is market-driven."

The New Zealand Herald comments:

"Also the foreign-exchange risk - the risk that exchange rates will have
moved against the borrower by the time the loan has to be repaid - is
generally peeled off the incoming credit and hedged. That risk had found
quite a diversified market, Gulde said: New York hedge funds and retail
investors in both Europe and Asia. "There seems to be quite a steady
appetite for New Zealand dollar risk. So the idea of funds drying up is not
something I would think is imminent." And a lot of the capital inflow is
through the parent banks of New Zealand banks, which makes it somewhat less
flighty than other sorts of capital. "Overall we would say that New Zealand
has a very stable, profitable financial system, no obvious short-term risks,
and the areas in the medium term we feel should be addressed are being

Chief among them is preparing for a potential crisis, which, given the
Australian ownership of all of New Zealand's major banks, is an issue of
transtasman co-operation. The issues are: "How do the regulators communicate
with each other? How can the issue of Australian depositor preference be
addressed? How can the hollowing out [of back office functions] of New
Zealand subsidiaries and branches be addressed? So how likely is it that in
the event of a systemic crisis the system can be stabilised in the short
term?" (...) The FSAP report, which also looks at securities market
regulation ("could be better funded") and transparency ("a model of best
practice"), is expected to be completed by mid-2004. It will be up to the
Government whether it is made public."


Meanwhile, the New Zealand Herald reports that:

The nation's median house price jumped a whopping 5.6 per cent in October,
the Real Estate Institute of New Zealand (Reinz) said today. For the year,
the median house price was 20.7 per cent on that in October 2002, Reinz
said. The number of sales rose 2.2 per cent in October and were up 15.6 per
cent on October last year. The median house price in October was
[NZ]$227,000, well up on September's all time high of [NZ]$215,000.


When I visited a Christchurch leader of the New Zealand Distribution Workers
Union, Paul Piesse, in 1989 as part of a campaign concerning changes in
labour laws, he remarked to me half-seriously, "as far as socialist
revolution is concerned in this country, we'll probably have to wait for the
Australian Red Army to arrive." He could be correct about that.


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