Markets and relative economic efficiency/productivity trends determine real exchange rates. What of the balance of payments deficit? Let me touch on one other issue that is relevant to the longer-term behaviour of the New Zealand dollar and New Zealand interest rates -- the balance of payments.
BIS Review 107/1997  -6-  We are currently running a current account deficit of the order of 6 percent of GDP. That puts us amongst the largest external deficits in the OECD. Note also that New Zealand’s net foreign debt currently amounts to around 80 percent of GDP -- which puts us at the top end of international experience.