Well, the Goverment has opened the books and the picture is not pretty - the New Zealand economy has tanked. Not only that, there is still a chapter to be added to the book. The tumultous events of the past few weeks, will paint a even more grim picture of the New Zealand economy and what lies ahead for us ordinary joes.

This is happening while, not uncoincidentally, the world economy is falling into recession. The situation is so bad is that government's around the world have stepped in to save the finance sector, in a bid to stave off an even bigger disaster. It's corporate welfare on a grand scale.

Here in New Zealand we are being told by the politicians and the free market cheerleaders that 'our' economy is somehow 'more capable' of weathering the storm - despite the fact that the government's own figures don't suggest this at all.

And why does Michael Cullen look worried even while he's assuring us that everything will be okay?

Over several years we have seen the New Zealand econmy being driven by an overheated property market - pumped up with money from finance companies and the banks. Warnings from the likes of economist Gareth Morgan that a collapse was inevitable went unheeded.

The bubble burst and the reckless finance companies were wiped out, taking with them the savings of tens of thousands of investors.

The collapse of the finance sector comes at a time when the New Zealand economy is in recession and will be so for many years.

The result could well be stagflation - when a combination of price inflation meets economic stagnation.

The response of capital to this will be to attack the living standards of ordinary people.

There will be an attack on wage levels and working conditions and a tightening on 'social spending'. Cuts to welfare benefits, for example, may be the order of the day - indeed some neo-liberal zealots are already calling for this.


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