Audrey Young

Audrey Young is the New Zealand Herald’s political editor.

S&P contradicts Key downgrade claim

Prime Minister John Key. Photo / Getty Images
Prime Minister John Key. Photo / Getty Images

Ratings agency Standard and Poor's has contradicted a claim by Prime Minister John Key that a credit downgrade would be more likely with a change of Government in New Zealand.

Mr Key was questioned in Parliament last week by Labour leader Phil Goff about the agency's downgrading of New Zealand's long-term foreign currency rating from AA+ to AA.

Mr Key claimed Standard and Poor's had said at a meeting last month that "if there was a change of Government, that downgrade would be much more likely".

The next election is on November 26.

Standard and Poor's sovereign rating analyst Kyran Curry, who attended the meeting in Auckland, said that would not have happened.

"In Auckland last month, I might have talked about the importance of the Government maintaining a strong fiscal position in the medium term but I would never have touched on individual parties.

"It is something we just don't do," Mr Curry said. "We don't rate political parties. We rate Governments."

Asked what New Zealand needed to do to have its higher ratings restored, he said it would require a sustained improvement in New Zealand's external position first.

This would come through stronger export performance and an improvement in public savings - "getting back to what New Zealand was actually doing not three years ago," Mr Curry said.

New Zealand had one of the strongest fiscal positions. At the moment, it was weaker and had been made even weaker again by the earthquake costs.

"The thing about New Zealand Governments, no matter which party is in power, is that they tend to do what they say they are going to do, and they tend to say things like 'maintaining a strong fiscal position over the medium term'."

He said he could see one day New Zealand again being an AAA rated sovereign.

"It would take a sustained improvement in New Zealand's external position, so much lower levels of debt and the Government returning its fiscal position to a more stable path."

The stimulus undertaken by the Government had weakened the balance sheet and the earthquake had weakened it further.

"If the external position strengthens, I can easily see an upgrade at some point."

- NZ Herald

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