NZ vulnerable to US fallout - professor
A visiting American business professor says New Zealand's open financial system makes it highly vulnerable to any fallout from a possible United States debt default.
The deadline for the US risking default is just days away, although there are signs of progress in talks.
Alan Beckenstein is a professor of business administration at the Darden School of Business at the University of Virginia and is also the faculty leader of the Ernst and Young executive programme in New Zealand.
He has visited the country regularly for the last 20 years working on case studies, including spending time at the Reserve Bank, at Treasury and with companies.
Professor Beckenstein says the consequences of the US political drama depends on how it and the partial government shutdown are resolved.
"We're getting a little too close to the wire for the second time in two years and I believe that will have some consequences," he says. "I hope not, but I think so."
"In terms of New Zealand, being a small, open, economy that does a lot of financing and generally shorter-term financing, for your economy you're highly dependent on the foreign exchange changes that might occur, as well as the cost of borrowing.
"That alone is a pretty big deal for New Zealand, because your economy is highly sensitive."
Professor Beckenstein says it is a crazy situation where a small country has somewhere between the 10th and 13th largest traded currency in the world.
"It has to do with the structure of your saving and investment and financing, so it makes you very sensitive to those kinds of things, so I think it's a big deal.
"In addition, you're part of the global system, and were the US dollar as a reserve currency to be threatened by the financial hijinks going on right now, the world has a problem," says Professor Beckenstein.
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