Bangkok--1 Oct--Standard & Poor's
Standard & Poor's Ratings Services said today that it had lowered 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+'. The outlook on the foreign and local currency ratings is stable. The Transfer & Convertibility (T&C) assessment for New Zealand is unchanged, at 'AAA'.
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.
The ratings on New Zealand reflect our opinion of the country'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.
Sovereign credit analyst for Standard & Poor's Kyran Curry said, "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."
"Downward pressure on New Zealand's ratings could re-emerge if New Zealand's external position continues to deteriorate," said Mr. Curry. "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."
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
AUSTRALIA
Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard & Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).
Media Contact:
John Piecuch, New York (1) 212 438.1579,
[email protected]
Analyst Contacts:
Kyran Curry, Melbourne (61) 3-9631-2082
KimEng Tan, Singapore (65) 6239-6350