New Zealand's banking system should be able to absorb credit losses arising from the virtual shut-down of the country to curtail the spread of Covid-19, ratings agency S&P Global said.
S&P Global said banks' profitability "should remain adequate" during the shutdown, and that their Australian parents should be able to support them, if necessary.
It said that while the anti-coronavirus measures would weigh heavily on the banking system, Government initiatives should help banks support stressed customers and businesses.
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The agency's relatively upbeat assessment comes as economists revise their growth forecasts sharply downward, the Government's coffers are prepared to take a massive hit, and as business confidence slumps to near-record lows.
The Government last week declared a state of emergency and announced a nationwide lockdown with only essential services remaining open for business in an attempt to curtail the spread of Covid-19.
Finance Minister Grant Robertson has unveiled a multi-billion dollar fiscal stimulus package while the Reserve Banks has embarked on a bond buying programme to support the financial markets.
S&P Global said in a report it believed the fiscal stimulus package and monetary actions taken should enable banks to support stressed customers and small and mid-size enterprises.
The measures would ensure that the economy and the banking system continued to function while the Covid-19 coronavirus outbreak continues.
"The support measures announced by the Reserve Bank should alleviate any immediate funding and liquidity risks for the banks, in our view," Lisa Barrett, a credit analyst at S&P Global Ratings, said.
"Even though credit losses may escalate, we think the banks' profitability should remain adequate to absorb increased credit losses, notwithstanding headwinds from low interest rates," she said in the report.
"We also consider that the four major banks in New Zealand are still likely to receive timely financial support from their Australian parents, the ratings on which are linked to the Australian sovereign, if needed," she said.
Last week, Parliament approved up to $52b in emergency spending powers, as governments around the world attempted to cushion their economies from the impact of Covid-19.
ANZ's latest Business Outlook Survey out today made for grim reading.
The survey showed business confidence plummeted 45 points to minus 64 in March, close to a record low.
A net 26.7 per cent of firms expect weaker activity for their own business, the lowest reading since the survey began in 1988 and down from 12 per cent who had expected an improvement in the prior survey.
Meanwhile Westpac forecast a 5.6 per cent contraction in Gross Domestic Product in the current year.
Westpac chief economist Dominick Stephens said the unemployment rate would reach 9 per cent and house prices would fall by 7 per cent.
"The recovery will be much sharper than previous recessions, but will still take years," Stephens said.
Stephens said the Government's response had been sensible, and would cushion the blow, "but it is expensive".
He now expects the Government debt-to-GDP ratio will rise from 18.5 per cent now to 40 per cent by 2022.