By Simon Shepherd
The New Zealand dollar has plunged against the US after investors fled because of New Zealand’s high debt levels.
It is part of a wave of fear that is gripping the world financial markets.
The head of the World Bank says his hopes of avoiding a double dip recession are fading every day.
The Kiwi dollar dropped four cents as global investors looked for safe havens and New Zealand’s high private debt levels are not attractive.
“While we are fairly sea worthy the sea that we are sailing on is getting much rougher,” says Finance Minister Bill English. “So anyone who has a bit of debt is keen as a higher risk than they used to be.”
Mr English is at the Washington meeting of the International Monetary Fund and the World Bank, and the mood is glum.
World Bank President Robert Zoellick says the world is in a danger zone.
“In 2008 many said they did not see it coming, leaders have no excuse now.”
It is the political dithering over solving Greece’s and other country's debt problems that is turning uncertainty to fear on global markets, sparking the biggest falls in two years.
One American trader says so much of stock trading is psychological and there is no feel good factor, “people are nervous and uncomfortable and everyone is fed up”.
It is not just stocks and dollars.
Derek Rankin of Rankin Securities says he has found gold and copper prices are dropping, “so it’s just ‘get me out, I want to be somewhere it is safe’, not it's debatable whether that it is safe, but that is the attitude at the moment”.
Record dairy payouts and good returns on forestry products are keeping New Zealand going and economic hopes still rest on the Christchurch rebuild.
BERL Business and Economic Research Ltd says that will provide a significant boost to the economy, to sentiment and confidence and not just to Christchurch people, but the rest of the economy as well.
But it is not enough to insulate New Zealand.
If there is a game changing event like Greece going bankrupt, the economic turmoil in the Mediterranean will ripple all the way across to the Pacific.
3 News