S&P affirms government AA credit rating, stable outlook
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Standard & Poor’s has affirmed the government’s AA rating which has come as welcome news, Finance Minister Grant Robertson says.
“This decision effectively gives a tick to the policy agenda outlined in the government’s Budget Policy Statement (BPS) in December, which confirmed our commitment to the Budget Responsibility Rules, together with the fiscal forecasts presented in the Half Year Economic and Fiscal Update,” Robertson said.
“S&P notes that the stable outlook reflects its expectation that New Zealand’s fiscal performance will remain sound, with a slowly improving net debt ratio over the next few years.
“They also say the composition of growth in New Zealand is likely to change in light of the new government’s policies. On residential housing, while the property market is softening, S&P expects residential investment to remain solid, supported by policies like KiwiBuild, which will help alleviate housing supply pressures.
“S&P continues to warn that New Zealand’s private international debt poses the biggest threat to the economy. However, they say New Zealand’s current fiscal settings provide the Government with flexibility to help offset risks associated with the high levels of external private debt.
“The government, through its Budget Responsibility Rules, has committed to reducing net core Crown debt to 20% of GDP within five years of taking office. This is a responsible target which ensures the government is well-placed to absorb future economic or natural shocks,” Robertson added.
S&P analysts Anthony Walker and Kim EngTan noted in their report that the ratings reflected “solid fiscal performance” and their expectations that higher government spending would not materially weaken the country’s fiscal profile.
“New spending measures, including more generous welfare, education and housing policies, are partly funded through the cancellation of the previous government’s proposed personal income tax cuts. As such, we do not expect the measures to materially affect the government’s fiscal position,” S&P’s report continued.
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“This decision effectively gives a tick to the policy agenda outlined in the government’s Budget Policy Statement (BPS) in December, which confirmed our commitment to the Budget Responsibility Rules, together with the fiscal forecasts presented in the Half Year Economic and Fiscal Update,” Robertson said.
“S&P notes that the stable outlook reflects its expectation that New Zealand’s fiscal performance will remain sound, with a slowly improving net debt ratio over the next few years.
“They also say the composition of growth in New Zealand is likely to change in light of the new government’s policies. On residential housing, while the property market is softening, S&P expects residential investment to remain solid, supported by policies like KiwiBuild, which will help alleviate housing supply pressures.
“S&P continues to warn that New Zealand’s private international debt poses the biggest threat to the economy. However, they say New Zealand’s current fiscal settings provide the Government with flexibility to help offset risks associated with the high levels of external private debt.
“The government, through its Budget Responsibility Rules, has committed to reducing net core Crown debt to 20% of GDP within five years of taking office. This is a responsible target which ensures the government is well-placed to absorb future economic or natural shocks,” Robertson added.
S&P analysts Anthony Walker and Kim EngTan noted in their report that the ratings reflected “solid fiscal performance” and their expectations that higher government spending would not materially weaken the country’s fiscal profile.
“New spending measures, including more generous welfare, education and housing policies, are partly funded through the cancellation of the previous government’s proposed personal income tax cuts. As such, we do not expect the measures to materially affect the government’s fiscal position,” S&P’s report continued.
Related stories:
Strong growth pressures regional lenders
LVR changes unlikely to reverse cooling market
