Finance Minister Bill English said the decision by two agencies to cut New Zealand's credit rating did not mean the New Zealand economy was weakening, but reflected global concern about foreign debt.

Hot on the heels of rival Fitch Ratings' downgrade of New Zealand's sovereign credit rating, Standard & Poor's followed suit this afternoon, saying the country's fiscal position has been weakened by Christchurch earthquake-related spending pressures and fiscal stimulus to support growth.

S&P said it had cut its long-term foreign currency ratings on New Zealand to 'AA' from 'AA+' and its long-term local currency rating on New Zealand to 'AA+' from 'AAA'. The short-term ratings are affirmed at 'A-1+' and the outlook on the foreign and local currency ratings stable.

English said the agencies acknowledged the government had made progress in getting its deficits and debt under control despite the Global Financial Crisis and the Canterbury earthquakes.

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However he said the downgrades reinforced the need for the government to get on top of its debts and return to surplus.

English said political opponents to the left were promising to borrow more, spend more and tax more, which he said was irresponsible and would make a challenging situation even worse.

"And those to the right of us are calling for radical spending cuts that would disproportionately affect the most vulnerable New Zealanders, cut growth and cost jobs,'' he said.

"We are following a balanced economic plan that is right for New Zealand.''

English said the New Zealand economy was in a better shape now than during 2008 and that he believed agencies' decision was driven by external events.

"Compared to other countries, New Zealand has come through the recession reasonably well. We're one of only 19 countries still rated AAA by Moody's and we're now the only highly-rated country with a two notch gap between our ratings with Moody's and Standard and Poor's," English said.

Labour said the two downgrades had been issued because of the Government's "abysmal" performance at boosting savings.

Its leader Phil Goff said high household and agricultural sector debt were the primary drivers behind both rating agencies' decisions.

He argued a capital gains tax advocated by Labour and ruled out by National would help stave off future downgrades.

"National's policies have failed and those chickens have come home to roost. This is a crisis of confidence in a government that has no plan and no policy to solve the crucial economic problems New Zealand faces."

Finance spokesman David Cunliffe said English had been "blindsided" by the downgrades after a recent meeting ratings agencies in Washington.

"Perhaps he had better stay away from them in the future because clearly they are not buying his spin."

Sovereign credit analyst Kyran Curry said: "the lowering of the foreign and local currency long-term ratings follows our assessment of the likelihood that New Zealand's external position will deteriorate further at a time when the country's fiscal settings have been weakened by earthquake-related spending pressures and fiscal stimulus to support growth."

He said the ratings reflect S&P's opinion on New Zealand's fiscal and monetary policy flexibility, economic resilience, public policy stability, and its sound financial sector.

"These strengths are moderated by New Zealand's very high external imbalances, which are accompanied by high household and agriculture sector debt, dependence on commodity income, and emerging fiscal pressures associated with its aging population," added Curry.

"The stable outlook balances the stabilization we expect between the government's debt profile over the medium term and risks associated with the country's high external debt. We expect the New Zealand major banks' credit profile to remain sound and for New Zealand to remain a core market for the banks' Australian parents. We also consider the strength in government finances to be an important mitigating factor to the risks associated with the external position. "

However, he said downward pressure on New Zealand's ratings could re-emerge if the external position continues to deteriorate.

"Rising public savings will be an important component for keeping the country's current account deficit in check. On the other hand, upward pressure on the ratings could eventually emerge if sustained current account surpluses, led by a stronger export performance and higher public savings, markedly reduced external debt."