The downgrade of New Zealand's outlook from stable to negative reflected increasing concerns internationally about external debt rather than a worsening situation here, Finance Minister Bill English says.

The international credit rating agency, Standard and Poor's, yesterday revised New Zealand's outlook from stable to negative.

Prime Minister John Key yesterday said the shift appeared to be about a stronger focus on countries with high levels of overall indebtedness.

English this morning said New Zealand had made some improvements but the external environment had changed with heightened concerns about what was happening in Ireland and some European countries.

"Our situation has actually improved somewhat over the last 12 or 18 months but the people who lend us money are getting more sensitive to the amount of debt that New Zealand does owe them," he told Radio New Zealand.

The Government had been trying to get on top of the foreign debt problem, such as through its "tax switch" where GST was increased but personal tax rates reduced.

"Which was designed explicitly to dampen the excessive consumption of the last 10 years and therefore dampen our demand for exports, to cut taxes on savings and investment so we could encourage more savings because their concern is New Zealand's external debt," he said.

While the Government owed some of the debt, most was held by households so the Government could take only indirect measures such as tax changes.

Overall, he thought the impact of the negative outlook would be minimal.

"This is more of a warning than anything... if our external debt gets significantly worse than people expect then the credit rating agencies might decide we are more of a risk."

Key yesterday said next year's budget could contain measures to encourage people to save more.

The Government had appointed the Savings Working Group which was due to report to the Government by the end of this year or early next year.

"We want to increase national savings to a higher level," he said.

"It may well be that the focus of Budget 2011 is based off a view that we want to increase national savings to a higher level but it's too early to determine that because we haven't seen the report."

The New Zealand dollar fell about a cent yesterday afternoon on the news and eased slightly further overnight and is now around US 77 cents.