Key stands behind comment that S&P more likely to downgrade Labour govt than National; Says received comment in email from 'source'

By Alex Tarrant

Prime Minister John Key is under fire for a comment he made in Parliament earlier this month that rating agency Standard & Poor's had said it was more likely to downgrade the government's credit rating if Labour was in power.

Key said he stood behind the comment, which he received in an email from a trusted source who attended a meeting between New Zealand and Australian bank economists, and Standard & Poor's analysts, in early September.

Labour this morning accused Key of lying about what he said Standard & Poor's had said, following comments from S&P analyst Kyran Curry to the New Zealand Herald that Key's version of events would not have happened.

"In Auckland last month, I might have talked about the importance of the Government maintaining a strong fiscal position in the medium term but I would never have touched on individual parties," Curry told the NZ Herald.

"It is something we just don't do," Curry said. "We don't rate political parties. We rate Governments."

Got it in an email

At his post-Cabinet press conference in Wellington on Monday, Key told media he was not at the meeting with Standard & Poor's in September, but that he had received an email on September 6 from a trusted source who was at the meeting.

That source told Key Standard & Poor's said there was a one-in-three chance that New Zealand would get downgraded and a two-in-three chance it would not, "and the inference was clear that it would be the other way round if Labour were in power," Key quoted his source as saying in the email (see the full email below).

“The person is known to me, they’re known to be very trustworthy. I rang the person, had a conversation with them and it was relayed exactly as I relayed it in the House," Key told media on Monday.

Key said he had not spoken to Standard & Poor’s to confirm whether S&P had made the comment.

“The person was at the meeting. I simply got the email, thought it was rather interesting, rang the person up. I’ve dealt with them before. They’ve given me information before which has been correct,” Key said.

The person was obviously confident that what he was telling Key was correct, he said.

“I wasn’t at the meeting, but all I’m telling you is it’s not a random comment I made up. I received the email, I verified it with the person. That’s it.”

What Key said in Parliament

Here is an extract from Alex Tarrant's October 4 article, Credit rating downgrades take centre stage in Parliament's last week as Opposition parties lay blame with govt, National blames Labour.

New Zealand's credit rating was now the same as Spain's, Goff said, adding National had constantly derided Spain as being an economy in trouble.

"It may well be, it sounds logical," Key said before quoting a line from the Fitch release which noted New Zealand was well-placed among the world's highly rated sovereigns.

"I will say this," he added. "When Standard & Poor's were giving a meeting in New Zealand about a month ago, what they did say was there was about a 30% chance we would be downgraded - that's what happens when you're on negative outlook. They did go on to say though, if there was a change of government, that downgrade would be much more likely."

See Key's comment in the clip below at 7 mins 20 seconds:

The email

The Prime Minister's staff released the email (without the name of the sender) to media after Key's press conference on Monday. The email was sent on September 6 at 11:24 am. See it below:

Hi John

I was part of a session with a range of economists yesterday morning – every year they do this session – with economists from Aus plus all the main NZ banks, and this year two from Standard and Poors, including the guy who obviously has a lot to do with the NZ grading.

Anyway, the S&P guys were very complimentary about how the NZ Govt is managing fiscally and their trust that what you say will happen happens, and your unwavering commitment to getting NZ’s balance sheet sorted for the long term.

But there was a key one-liner that I thought you could well use. S&P said that there was a 1/3 chance that NZ would get downgraded and a 2/3 change it would not, and the inference was clear that it would be the other way around if Labour were in power. They discussed the impact on interest rates if NZ got downgraded and how that would quickly impact on the home owner mortgage market, so net net there is a much higher risk to NZers that they will face higher interest rates under a Labour Government.

Don’t know how you use it but they were quite serious.

Labour attacks

Following S&P analyst Kyran Curry's comments in the Herald this morning, Labour leader Phil Goff accused Key of misleading Parliament with the comment. Goff said Labour would lodge a privileges complaint about the comment.

"The Prime Minister must now apologise for misleading Kiwis instead of running around claiming he relied on information emailed to him from an unnamed ‘source,’" Goff said in a press release.

"If his ‘source’ is in fact his Finance Minister Bill English, then he made a big mistake trusting him. He's the guy who went to visit the ratings agencies and when they downgraded New Zealand said he didn't see it coming," Goff said.

(Updates with the email, what Key said in Parliament, video of Key in Parliament, video of Key answering questions at post-Cabinet press conference)