PM backtracks on downgrade talk

John Key stands next to an Australian flag after losing a bet on the Warriors to Australian Prime Minister Julia Gillard. Photo / Mark Mitchell

The PM did not attend meeting and email reveals S&P did not snipe at Labour

Prime Minister John Key sheepishly acknowledged yesterday that he had only second-hand information about what ratings agency Standard & Poor's allegedly said about Labour at a meeting in Auckland.

And it wasn't what he claimed in Parliament it had said.

Mr Key claimed in Parliament that Standard & Poor's had said last month that a credit downgrade would be more likely with a change of Government.

It now transpires that Mr Key was not at the meeting, and that his information came from someone at the meeting whom he knows but will not name.

Also, when Mr Key released an email yesterday from the unnamed source, it was evident that the claim about a downgrade under Labour was the source's own "inference" taken from the meeting, not a statement made by Standard & Poor's.

"There was a key one-liner that I thought you could well use," the emailer said in telling Mr Key about the meeting of economists. "S&P said that there was a 1/3 chance that NZ would get downgraded and a 2/3 chance it would not, and the inference was clear that it would be the other way round if Labour were in power."

Mr Key received that email on September 6, and on September 30 both S&P and Fitch ratings agencies downgraded New Zealand.

Under questioning from Labour leader Phil Goff in Parliament last week Mr Key said: "When Standard & Poor's was giving a meeting in New Zealand about a month ago, what it did say was that there was about a 30 per cent chance that we would be downgraded. This is what happens when one is on a negative outlook. It did go on to say, though, that if there was a change of Government, that downgrade would be much more likely."

The contradiction was revealed yesterday by the Herald in a report quoting Standard & Poor's Melbourne-based analyst Kyran Curry, who was at the meeting.

"I would never have touched on individual parties," he said. "It is something we just don't do. We don't rate political parties; we rate Governments."

Mr Goff laid a breach-of-privilege complaint with Speaker Lockwood Smith against Mr Key, claiming he knowingly misled the House. But Dr Smith is away in the US until the dissolution of Parliament on October 20.

Mr Key said at his post-Cabinet press conference yesterday that he would not name his source. "It wasn't a random comment I made up."

He had received the email and telephoned the sender, who said the information he received "tallied with what I said in the House".

"The source was telling me what S&P said."

Mr Key had no way of knowing if that was true because he wasn't at the meeting.

Asked if during the conversation with his source he had clarified whether the claim was "inference" or had been stated, Mr Key said his source said it had been said.

* Mr Key yesterday honoured a bet he lost to Australian Prime Minister Julia Gillard, fronting his press conference with an Australian flag.

Mr Key lost the bet when the Manly Sea Eagles beat the Vodafone Warriors in the NRL grand final.