At that time, deficits were often the result of substantial fiscal deficits and had to be covered by government borrowing overseas in foreign currency. Today, of course, the government’s accounts are in surplus. So what causes the sort of current account deficits that have recently provoked so much comment?
It is probably fair to say that today’s deficit is in part the result of the enthusiasm which foreigners have had for investing in New Zealand. Not, I should stress, because foreign investment creates a current account deficit over the full life of the investment.