| Robust economic management, aimed at reducing government engagement in the economy and lowering government debt, has made New Zealand's participation in international money markets a rare event. The government's long-term strategy of avoiding debt as a way of financing government activities and actively retiring existing obligations as fast as possible has significant implications for the markets. This debt policy actually a non-debt policy will inevitably lead to smaller and smaller issues of new government paper. It means that fund managers needing this kind of New Zealand security could well have to buy on the open market to fill out portfolios. Given the current yield on government bonds (about 8%) and the probability of rates in New Zealand declining, as forecast by Bankers Trust New Zealand among others, fund managers could well interpret the impending scarcity of new government paper as a "buy now" signal. While the government has been unloading its own debt, its policies have also brought a number of new players into the market. Its strategic disengagement from business activities by selling off enterprises has created a group of non-government but nevertheless favourably rated issuers. |