Global ratings agency Fitch says the outlook for New Zealand's credit rating is improving, as Government debt levels falls and further surpluses are expected.

New York-headquartered Fitch raised its outlook for New Zealand's foreign currency rating - currently AA - to positive from stable.

This is not the same as raising New Zealand's credit rating, but indicates an eventual upgrade is more likely in the future.

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Fitch said the revision "reflects New Zealand's sound fiscal management and low and declining Government debt" as a proportion of gross domestic product (GDP).

Lower debt "enhances the country's resilience to economic and financial shocks, particularly given its exposure to external developments".

As well as New Zealand's dependence on offshore borrowings, Fitch said risks to the economy included its dependence on commodities and China, which accounts for 28 per cent of total exports.

"However, prices of dairy and other agriculture exports remain resilient and have supported the terms of trade over the past two years, despite the gradual slowing of the Chinese economy. "

At the half-year economic and fiscal update, the Government signalled it was modifying its Budget responsibility rules which would mean it could allow debt to rise to 25 per cent of GDP, up from the initial target of below 20 per cent by 2022.

Fitch said this signalled a looser fiscal stance but did not affect the underlying prudence.

"A record of sound fiscal management provides buffers to allow the Government to utilise fiscal policy to respond to economic shocks and natural disasters."

Finance Minister Grant Robertson said Fitch's action was recognition of the Government's "strong financial management and plan to futureproof the economy with new infrastructure investment".


He added: "This is further recognition that we are managing the books well, and balancing important investments across New Zealand including in health, education and infrastructure."

The analysis from Fitch offered praise across the political spectrum, as it pointed to political polling suggesting the election would be "a tight race" between the Labour-led coalition and National.

"Key policy differences centre on tax policy and business and environmental regulation, while a commitment to sound fiscal management has been demonstrated across political parties," analysts at Fitch said.