Liam Dann: NZ can learn as Emerald Isle sings the blues

The Irish have made an art form of celebrating misfortune. Through centuries of bad luck and colonial abuse they have refined a cultural tradition - not to mention a sense of humour - which has earned them a place in the hearts of many around the world.

On that basis, the economic boom always sat a little uncomfortably - like an outsize Aran jumper. But they deserved the chance to grow into it.

It's a real shame the people are now paying the price for being lured into the property bubble which has sunk them. It's not like every other Western nation didn't make the same mistake - too much cash poured in to property with inflated prices encouraged homeowners to over-estimate their wealth and drove more debt-fuelled spending.

It was a global property party - unfortunately for the Irish they know how to party harder than most.

The Economist reports that at its peak, about a fifth of Irish workers were in the property sector.

When the banking world went pear-shaped in 2008, the Irish state followed the rest of the world and guaranteed bank deposits.

But ironically - given the country had opened itself to much foreign investment - the banks remained locally owned. Without the security of foreign parents to fall back on, they began to sink in a mire of property debt. The call on the Government coffers became too great.

Ireland has now been forced to accept an EU and IMF bailout which comes with a heavy price. The budgetary measures announced this week were described in some reports as the harshest in the nation's history.

That's a big call given the length of that history. The Penal Laws imposed by the English in the 17th century to take Catholic land were pretty grim.

In modern terms the Irish situation is severe enough. It serves as another timely reminder of just how well New Zealand has survived the crisis thus far.

The Irish Government has announced austerity measures which will cut about 25,000 state jobs, slash benefits and pensions, reduce the minimum wage and increase tertiary fees.

Taxes will go up, with the sales tax rising to 23 per cent. Income tax increases are expected to take at least €3000 ($5265) from the wages of those in middle and upper wage brackets.

The corporate tax - at just 12.5 per cent - is the one tax the Government hasn't dared touch. Multinational companies with operations in Ireland are estimated to account for about 20 per cent of GDP, leaving little choice but to keep them happy or risk losing even more jobs.

And despite these measures, a number of commentators are concerned that the €85 billion bailout won't be enough and the nation will still default on its debts.

That would send soaring interest rates through the roof and ensure the country is locked in to a spiral of economic collapse.

New Zealand has managed to avoid Ireland's fate but it has been more through good luck than good management.

Our banks are Australian and were never close to collapse and our economy remains underpinned by commodity exports which continue to fetch high prices, thanks to the boom in China.

While a reliance on exporting milk powder, meat and logs might not close the wage gap with Australia, in times like this, when every other sector of the global economy is faltering, it can safeguard the standards of living we're used to.

But that doesn't mean we can afford to sit back and relax.

If anything, we need to treat the relatively benign downturn we are experiencing as a window of opportunity. We're lucky to have some time to deal with our high levels of national debt and we would be mad not to do so.

Ratings agency Standard & Poor's reminded us of that this week when it downgraded the outlook on the national credit rating to negative. The Government downplayed the announcement but John Key and Bill English know it can't be ignored.

We must take steps to ensure our rating is maintained or we will see interest rates rise, putting more pressure on homeowners.

This week outgoing Treasury chief John Whitehead called for the Government to move faster to cut the deficit. It's not an easy option for a government heading into an election year but it's one that needs to be recognised by both parties.

The Irish will bounce back and the tough times won't dim their passion. But it's a huge setback for an economy that had come so far. All those involved in running the New Zealand economy should be looking long and hard at their experience.

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