Budget 09: S&P delivers favourable verdict

International credit rating agency Standard and Poor's has cast a favourable verdict on the Budget, upgrading New Zealand's outlook from negative to stable.

Finance Minister Bill English delivered his first Budget today which dragged down long term debt forecasts through a mix of axing planned tax cuts, suspending payments to the New Zealand Superannuation Fund and reducing long term spending increases.

The Government had been worried that if S&P had cut New Zealand's credit rating it would mean an increase in interest rates for them and everyone.

S&P said today that the Budget delivered a "sound" outlook.

"The change in the outlook on the foreign currency rating reflects our view that the measures announced in today's budget will support stabilisation in the government's fiscal position over the medium term," S&P credit analyst Kyran Curry said.

Fiscal deficits were offset against the deferral of personal income-tax cuts and savings measures associated with public sector reforms and service delivery, he said.

"The Government estimates that additional debt required to fund the deficits to be 38.7 per cent (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."

Moody's Investors Service maintained a stable outlook on New Zealand's sovereign ratings after the release of the Budget.


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