NZ rating outlook stable, agency says

Photo / Mark Mitchell

Ratings agency Moody's Investors Service says the outlook for New Zealand's Aaa rating remains stable.

The rating was anchored by the Government's low debt relative to most other Aaa-rated countries and Moody's belief that the country would continue with fiscal and monetary discipline as well as market-oriented policies, Moody's said today.

New Zealand's Aaa ratings were based on its high economic strength, very high institutional and government financial strength, and very low susceptibility to event risk, a Moody's vice president and senior credit officer, Steven Hess, said.

"Moody's believes that the government, of whichever party, will maintain a policy of low debt and fiscal soundness.

"Although the recent global financial crisis did affect the country and government finances, the consequences were less severe than in a number of other Aaa-rated countries," Hess said.

"New Zealand's flexible and market-oriented economic policies have supported economic performance that has become stronger over time and less subject to external shocks."

Moody's has published an annual update on New Zealand, written by Hess, which looks in detail at the key rating factors.

New Zealand scored well in all those factors, Moody's said.

Economic growth was likely to remain sound, but would be more subdued than the average annual rate of 3.3 per cent seen from 2000 to 2007, the report said.

As in some other countries, household leverage had reached a fairly high level before the recent international crisis, and less willingness to take on additional debt may limit the growth of household spending.

"The Government also faces the prospect of an extended period of fiscal consolidation after the ending of economic stimulus," Hess said.

"Thus, although exports may provide some underpinning of growth, and business investment should revive, growth rates are likely to be lower than during the years leading up to the global financial crisis."

Gross central government debt as a proportion of GDP was forecast to rise to the 32-33 percent range during 2011-14 before beginning to decline, the report said.

The recent call on the government deposit guarantee and spending related to the Canterbury earthquake may result in a somewhat higher ratio, although not enough to significantly change the overall trajectory.

- NZPA