The Government is playing down predictions published by powerful US business magazine Forbes that New Zealand is on the path to economic disaster.
Economic analyst Jesse Colombo yesterday labelled New Zealand’s economy a bubble which will pop devastatingly.
The current housing bubble was creating a mortgage bubble, he said, with almost half of outstanding mortgages currently having floating interest rates.
Rising interest rates would eventually pop this bubble, banks would experience losses on their mortgage portfolios, “the country’s credit boom will turn into a bust” and over-leveraged consumers will default on their debts, Colombo said.
“Not only is New Zealand’s banking system dangerously exposed to the country’s property and credit bubble, but so is the entire economy.”
The left have been dining out on this bit of doomsday stuff for days.
Acting Finance Minister Steven Joyce last night dismissed 28-year-old Colombo’s theories as “alarmist” and described him as a “bubble-ologist”.
“His view on life is that the whole world is pretty much in a bubble and there’s no place he doesn’t pick on,” Joyce said. “I wouldn’t be paying too much for that level of analysis. He’s a little bit like [earthquake forecaster] Ken Ring. He’s out there predicting catastrophe at every turn.”