WELLINGTON - Standard & Poor's has reaffirmed New Zealand's credit ratings and the negative outlook for its foreign currency debt.
The negative outlook reflected the likelihood of further budgetary and balance of payments pressures in the next few years, both of which could boost the public sector's external debtburden if left unchecked, the agency said.
With the incumbent National Party and opposition parties favouring looser fiscal policies in varying degrees, it said a downgrade could occur over the next 12 months, should the fiscal balance deteriorate and public external debt rise.
New Zealand's net external debt, at about 2.5 times annual exports, is more than four times the median for other countries with an AA rating.
But it represented a manageable contingent liability for the Crown because local financial institutions were owned by creditworthy foreign banks, and successive governments had resisted supporting corporates in financial distress.
The current account deficit was likely to reach 25 per cent of exports this year, one of the highest among AA-rated countries.
But a pickup in the low private-savings rate should narrow the gap between domestic savings and investment over the medium term.
