By 3news.co.nz staff
A second ratings agency has downgraded New Zealand’s credit rating following the decision by Fitch to move the country from a AA+ to AA.
This afternoon Standard and Poors downgraded New Zealand's long-term foreign currency ratings from AA+ to AA and its long-term local currency rating on
New Zealand to AA+ from 'AAA.
The short-term ratings are affirmed at
'A-1+' and the outlook on the foreign and local currency ratings stable.
Finance Minister Bill English has called a news conference at 3pm to talk about the downgrades. 3news.co.nz will live stream Mr English's news conference.
Earlier today Fitch said 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