Threats from high private debt are lessened as most of these liabilities are held by Australian-owned banks. Photo / Richard Robinson
Threats from high private debt are lessened as most of these liabilities are held by Australian-owned banks. Photo / Richard Robinson
New Zealand's Aaa sovereign credit rating with Moody's Investors Service is underpinned by the nation's economic strength and low vulnerability to event risk, the rating agency said yesterday.
Moody's said the Government's fiscal and debt positions were very strong, and any threats from the nation's high level of private debtwas mitigated by the fact that the majority of those liabilities are held by the nation's Australian-owned banks.
Still, New Zealand's total external liabilities equalling 159 per cent of gross domestic product is the nation's biggest vulnerability, and prompted downgrades by rival rating agencies Standard & Poor's and Fitch Ratings at the end of September.
"A strong fiscal framework, which has supported the successful track record of fiscal prudence under governments of both major political parties, provides some assurance that the budget balance will return to surplus by the middle of the decade," Moody's said. "The negative net international investment position has been large for many years without substantially affecting the Government's finances."
The Government has worked to keep its net debt below 30 per cent of GDP, even as it borrowed a record $20 billion last financial year, and Moody's said it was set to peak below the average ratio of other triple-A rated nations.
The rating agency noted New Zealand's rising vulnerability to earthquakes after the temblors in Canterbury caused upwards of an estimated $20 billion in damage.
Investors rallied to New Zealand government debt in the first sale on Tuesday, with short-term bills attracting bids worth three times the $1.48 billion sold.
The rating agency's credit analysis had little impact on the market.
