Budget staves off Standard & Poor's downgrade

Photo / APN

Bill English's Budget has done enough to stave off a downgrade from Standard & Poor's but not enough to reduce the risk of one.

S&P said the Government's budget was "consistent with the assumptions that feed into our sovereign ratings on New Zealand".

They currently stand at AA+ with a negative outlook for government debt denominated in foreign currencies and AAA with a stable outlook for debt in local currency.

S&P analyst Kyran Curry said the negative outlook on the New Zealand foreign currency rating reflected the possibility of a downgrade if New Zealand's external debt did not improve.

Achieving the savings outlined in today's Budget "will be an important component of such an improvement".

Mr Curry said the Government's finances may need to be adjusted faster if the cost of money borrowed from overseas by our banks rose.

"On the other hand, the ratings could stabilise at the current levels upon a sharper-than-expected improvement in the external accounts, led by stronger export performance and higher public savings."