Credit rating agency Moody's annual report on New Zealand confirms that we
have a strong, adaptable economy, Treasurer Bill English said today.
"That is exactly what National's economic framework is designed to achieve
and it is what New Zealand needs to move into the 21st century.
"The message from the report is that we must continue to have policies that
drive growth, and that we need sound government financial management behind
that. Running surpluses and repaying debt are important, so any reduction in
surpluses should be about improving our economic performance.
"Moody's says the country's credit rating of Aa2, the same as Australia,
reflects the adaptability and improved performance of our economy from
fifteen years of structural reforms and a prudent macroeconomic framework.
"Moody's also said the Government's record in managing public finances was
impressive relative to other OECD countries. The healthy fiscal position and
the government's low debt burden supports the Aaa rating on the government's
domestic debt.
"This fiscal responsibility is important to maintain investor confidence,
according to Moody's. This is because the high current account deficit
leaves us exposed to external developments and potential shifts in market
sentiment.
"But New Zealand's Aa2 credit rating is not under threat from our current
account position. Moody's confirmed in the annual report that our current
credit rating fully captures their concerns about New Zealand's external
position.
"They noted a number of factors which help alleviate New Zealand's
vulnerability, including our floating exchange rate, the widespread use of
hedging against exchange rate movements, and the fact that much of New
Zealand's external debt is in domestic currency and/or accounted for by
inter-company loans.
"The ratings agency also commented on New Zealand's reliance on agricultural
exports, which has contributed to weakness in our trade balance as the
economy has been affected by drought and soft world prices. Treasury's
latest forecasts are for exports of meat and dairy products to grow by 12%
next year and this will help lead to a reduction in the current account
deficit.
"Over the longer term, Moody's noted the importance of boosting private
savings. In their opinion, future reforms to the welfare system and the
amendments to the tax structure envisaged by the government could lead to an
increase in savings in New Zealand.
"We recognise the importance of strengthening New Zealand's export sector.
This can best be achieved by providing an environment in which all firms can
excel. Low taxes, flexible labour markets, and reducing costs to business,
are policies that will achieve this," said Mr English.
Ends