English brushes off Fitch downgrading NZ to AA

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Fri, 30 Sep 2011 10:16a.m.

Bill English

Bill English

Fitch Ratings has lowered New Zealand's credit rating by one notch from AA+ to AA, but finance minister Bill English says the country is less vulnerable than three years ago.

The world's third largest ratings agency says New Zealand's high level of external debt is a key vulnerability which is likely to persist.

The debt reflects a saving and investment imbalance.

"Nonetheless, New Zealand remains well placed among the world's highly-rated sovereign credits, with its creditworthiness supported by moderate public indebtedness, fiscal prudence, and strong public institutions," Fitch says.

The New Zealand dollar dropped about 1 cent to US76.96 cents following the announcement.

Finance Minister Bill English says credit rating agencies are "more sensitive" because of global circumstances.

"New Zealand is less vulnerable than it was back in 2008 ironically when our credit rating was higher," he told TVNZ.

Banks are in better shape, government finances are on track to surplus and households are saving more and taking on less debt, Mr English says.

Standard and Poor's and Moody's will look at New Zealand with the same kind of view as Fitch, he says.

A downgrade has “been on the cards for some years”, 3 News business editor Michael Wilson told Firstline this morning, and has been triggered by recently released balance of payments figures which show our deficit increased by half a billion dollars in the last quarter.  

“We’ve already got massive debt – our total debt is about 83 percent of GDP, which is way up there compared to many countries.”

The downgrade's effect on the dollar however will be a boon for exporters.

“Our balance of payments situation can right itself with a lower value dollar… it’ll improve our export situation to some degree,” says Mr Wilson.

Labour leader Phil Goff says the downgrade is proof on the Government's economic mismanagement.

"The downgrade is a clear judgment of National's failure to get the economy growing and to deal with New Zealand's long term problems".

Mr Goff said it showed why Labour's plan to introduce a capital gains tax to redirect investment into the productive economy and pay back debt without selling assets was so important.

NZN / 3 News

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Comments

30 Sep 2011 03:52p.m.

zac wrote:

This must be Michael Cullen's fault, right Mr English?

30 Sep 2011 02:01p.m.

William wrote:

Given that Fitch's downgrade of New Zealand's credit rating to AA has its basis in a nett external debt of 83% of GDP and a quarterly GDP growth rate of 0.1 % Bill Englishs attempts to explain this away are considered farcical. Of course it couldnt have as its basis an increase in GST to 15%,a government annual deficit of $16 billion to fund tax cuts,a minimum wage of less than $15 per hour, increases in ACC,road user, and other petrol based levies and the resultant 5.6% increase in the cost of living. Likewise the resultant increase in household debt and reduction in consumer discretionary spending could not have anything to do with the increase in Private Sector offshore borrwing as New Zealand companies struggle to stay afloat. What therefore is clear is that this Government has to go before this country suffers a National economic meltdown as a direct consequence of its unworkable and unsustainable economic measures.

30 Sep 2011 01:18p.m.

paul wrote:

everyone is blamming national, blame the usa....watch the movie "inside job" and you will see why we are in this mess..... de-regulating the market. besides, what would labour do? they cant fix this mess any more than national can, and when you say the rich are complaining about hard done by, some people arent as rich as people assume they are and u look at them and say your getting a raw deal... i would rather work for someone else right now than be self employed and so called "rich" like people i know.

30 Sep 2011 12:11p.m.

Shane wrote:

After three years of incompetence at the helm - this is what we get. And National's plans to sell our state assets will make the problem worse. The reason we have had the downgrade is primarily because of our bad balance of payments which is a direct result of overseas ownership of our companies and farms - something National want to increase. We have to get rid of these free-market fools.

30 Sep 2011 11:59a.m.

Pete wrote:

You might mention that Moodys rates us at AAA with a stable outlook, and Standards and Poors at AA+. Also Fitch noted NZs rating as being supported by 'fiscal prudence' and that our finances were stronger than many other countries. heir downgrade is more a reflection of turbulent markets than anything domestic.

30 Sep 2011 10:48a.m.

Clarke wrote:

The thing that Mr English forgets to mention is that National have borrowed 40-50 Billion dollars to cover deficits, part of which they created by giving the wealthy 2.5 Billion dollars in tax cuts per year. New Zealand isnt in a stronger position than it was three years ago, we are in a much worse position, and if his comments from yesterday about talks of another deeper recession come to pass then we might as well line up for a bail out, selling our assets isnt going to cover our debt and National are creating no new streams of revenue like a capital gains tax or a levy on the wealthy for christchurch. Its being left to ordinary kiwis to shoulder the burden of this recession whilst the rich sit back and lie about how hard done by they are and how much tax they have to pay (after they have hidden the majority of it in properties and family trusts. For English to say that we are in a stronger position is utter tripe. Remember selling off all the assets that National proposes will likely only cover 6-9 months of debt... wont touch or pay back any of the money that we already owe. Its National taking a 6 month reprieve at the expense of assets that all kiwis own, and only the very priveldged will have them soon.