Outlook On New Zealand Revised To Stable, Ratings Affirmed, On Sound Budget
Melbourne, May 28, 2009—Standard & Poor’s Ratings Services said today that it has revised the outlook on the ratings for New Zealand, and affirmed the
ratings at ‘AA+/A-1+’. The ratings action reflects the sound outlook for the sovereign’s fiscal position, as articulated
in the government’s budget, released today
“The change in the outlook on the foreign currency rating reflects our view that the measures announced in today's
budget will support stabilization in the government's fiscal position over the medium term,” said credit analyst Kyran
Curry, of Standard ’s Sovereign Ratings team.
The government is forecasting fiscal deficits on an accrual basis of 4.4% of GDP in the fiscal year ending June 30,
2010, 5.1% of GDP in 2011, and 5% of GDP in 2012 due to a cyclical weakening in revenue and counter-cyclical stimulus
measures. These are offset against the deferral of personal income-tax cuts and savings measures associated with public
sector reforms and service delivery. The government estimates that additional debt required to fund the deficits to be
38.7% of GDP by 2013.
“The successful delivery of this strategy -- returning the operating position to surpluses over the cycle and
maintaining low debt -- is consistent with maintaining the 'AA+' foreign currency rating on New Zealand,” continued Mr.
Curry. “The main risk to the ratings would be a significant weakening in the credit quality of New Zealand's banking
sector, which is largely owned by the Australian banks; however, we continue to expect the banks' capitalization to
remain adequately able to absorb the likely increase in credit losses given the weak economic environment and, funding
and capital support from the parent banks, if required. Standard & Poor’s considers that the major banks in New Zealand are core subsidiaries of their Australian parents.”
Standard & Poor's today also affirmed its 'AA+/A-1+' foreign currency ratings, but revised the outlook on the long-term ratings to
stable from negative, on the following government-related entities: Housing New Zealand Corp., Housing New Zealand Ltd.,
New Plymouth District Council, Counties Manukau District Health Board, Auckland District Health Board, and Christchurch
City Council and its wholly owned subsidiary Christchurch City Holdings Ltd. The AAA/Stable/A-1+ local currency ratings
on these entities were unchanged.
About Standard & Poor’s
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ENDS