International credit ratings agencies are feeling relaxed about the latest outbreak of Covid-19, despite the Government bleeding millions of dollars each day fighting the virus.
Ratings agencies rate the quality of the Government's debt, which helps the organisations who buy the debt to price it properly.
Good credit ratings usually mean lower borrowing costs for the Government, while lower credit ratings push the cost of borrowing higher.
If the ratings agencies felt that a government's excessive spending or poor economic management threatened its creditworthiness, they would likely downgrade their credit rating.
But that appears unlikely, with ratings agencies spoken to by the Herald confirming their view that the Government's finances remain strong, despite the hard lockdowns used to fight Covid-19.
Anthony Walker, a sovereign analyst at S&P said that New Zealand would likely bounce back from the latest lockdown, as it had done last year, saying solid economic performance gave the Government "headroom".
"New Zealand has outperformed many countries since the onset of the pandemic, particularly with regards to economic outcomes.
"This outperformance was a contributing factor behind our decision to upgrade the rating to AA+ in February.
"The likelihood of another swift economic recovery once this lockdown is lifted affords it some headroom at the current rating level," Walker said.
Last year S&P upgraded New Zealand's foreign and local currency government debt by a notch to 'AA+' and 'AAA', respectively, from 'AA' and 'AA+'.
Martin Petch, Moody's sovereign analyst for New Zealand was also positive, saying New Zealand had a history of running a strong fiscal policy.
"The track record and commitments to fiscal surplus remains high," Petch said.
"We're expecting over time New Zealand's debt levels will likely decline back to the low levels it had in the past," Petch said.
Petch said credit ratings were really about how countries compared with one another, and New Zealand compared favourably.
New Zealand's gross debt was 28.1 per cent of GDP in 2019. Treasury's Budget forecasts say gross debt is now expected to rise to about 37 per cent of GDP by 2025.
Ratings agencies tend to use the gross debt-to-GDP measurement rather than the net debt-to-GDP ratio, which is more common in New Zealand.
Petch said despite the outbreak New Zealand's finances were still flexible enough "to respond to other issues New Zealand faces including social issues".
"There's flexibility in the case of another downturn or a natural disaster - those kinds of things," Petch said.
Moody's rating for New Zealand's debt is "Aaa" for both foreign and domestic currency.
One threat to the Government's finances was the housing market, which could put the Government in a difficult position were it to come under strain and trigger a crisis that it would be difficult to get out of.
Walker sounded notes of caution too, warning that if the lockdown dragged on too long the Government's finances could come under strain.
"If the lockdown were to drag on over a long period and the associated economic disruption was not temporary, it could pressure the fiscal accounts and rating," Walker said.
However he was optimistic.
"This isn't our current expectation, however," he said.