KEY POINTS:
New Zealand did better out of the recent falls on world sharemarkets, and may even have gained because of the fall in the dollar, Finance Minister Michael Cullen said today.
Large central banks have poured hundreds of billions dollars into the banking system over concerns there was not enough cash around to deal with the fallout from US jitters over housing loans.
US markets' concern at many banks' exposure to defaulting mortgages made on dodgy credit sent shockwaves around financial and share markets around the world.
But Dr Cullen said New Zealand weathered the storm because it was not so exposed to the "sub-prime" loan problem. It had even created some positive effects due to many money traders taking a more conservative stance.
"From New Zealand's perspective it is not unhelpful in taking some of the heat again out of the New Zealand dollar because of the flow-on effects," Dr Cullen said.
He also believed that some had over-reacted to the problem.
"I think there was to some extent a bit of an exaggeration around the seriousness of what is occurring," he said.
"I think what we have learnt over the last week or so is the international finance system is in much better shape to cope with these kind of events than was the case 10 years ago."
Central banks in Europe, the US and Asia have injected more than US$400 billion ($548 billion) in liquidity injections over recent days.
In recent years, the US banks have been giving large mortgages to people on low or fixed incomes at very low rates of interest.
Many people are being forced out of their homes when the interest rates rise.
To make the problem worse housing prices have been falling in some parts of the US, leaving many owing more than their homes are worth and unable to service the debt.
The crisis stems from concerns that banks exposed to losses in the US sub-prime market might have insufficient cash to continue lending normally, drying up funds needed for investments and thereby damaging the economy.
- NZPA
