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NZ dollar hits 34-month high, as New Zealand becomes the first developed country with investment-grade debt to receive a credit rating upgrade since COVID-19 hit

NZ dollar hits 34-month high, as New Zealand becomes the first developed country with investment-grade debt to receive a credit rating upgrade since COVID-19 hit

The New Zealand dollar rose to a 34-month high against the US on Monday afternoon, as Standard and Poor’s Global Ratings raised New Zealand’s sovereign credit rating.

The New Zealand dollar peaked at 73.4 US cents on Monday afternoon - the highest it’s been since April 2018.

The uptick followed S&P lifting New Zealand’s foreign currency rating to AA+ from AA, and its local currency rating to AAA from AA+. The outlook is stable.

The changes make New Zealand the first developed country with investment-grade debt to receive an upgrade since COVID-19 hit.

S&P noted New Zealand is recovering quicker from COVID-19 than most advanced economies, as it’s contained the spread of the virus.

“We now believe that the government’s credit metrics can withstand potential damage from negative shocks to the economy, including a possible weakening of the real estate market.” S&P said.

S&P also raised the ratings of the New Zealand Local Government Funding Agency, Kāinga Ora, Housing New Zealand and a number of local councils on the back of the move.

The upgrades signal buying bonds issued by the New Zealand Government and associated entities is a relatively safe investment. This means New Zealand can technically lower the cost of issuing this debt. 

S&P credited the New Zealand Government for having low debt by global standards.

It went on to explain its rating upgrade decision, saying: "New Zealand's strong economic recovery reflects its proactive policymaking and decades of structural reforms. The economy, which is outperforming many advanced economies, remains wealthy and diverse in a global context after accounting for the COVID-19 pandemic.

"Stable institutional and governance settings underpin our rating with a high level of transparency and reliability…

"Downside risks persist, such as another outbreak, geopolitical tensions between major trading partners, and delays administrating an effective vaccine. Furthermore, travel restrictions will continue to severely limit tourism and international student flows as well as migration levels, dragging on short-term population growth…

"Because of a historical build-up in property prices, the risk of a sharp correction remains elevated. This is especially so in the current environment, with potentially higher unemployment flowing from the pandemic. If prices decline sharply, the effect on financial institutions would be amplified by the New Zealand economy's external weaknesses, particularly its persistent current account deficits.

"A property correction is not our base case, given New Zealand's strong fundamentals…

"We believe economic growth and low interest rates will continue to drive property price appreciation in the next half year, with the effect of the revised LVR [loan-to-value ratio] restrictions taking some time to flow through to property prices."

Finance Minister Grant Robertson said: “Our careful management of the Government’s books meant we were in good shape as we went into 2020, particularly with relatively low public debt. That stood us in good stead as we supported our people and our businesses through the pandemic."

See credit ratings explained here.

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Cool. An upgrade based on our ability to lower the cost of debt. Back slaps all around.

By all accounts I’ve come across, the housing market has recovered well.


Hyperinflation is definitely NOT a recovery.

All done on debt.

All done on resource draw-down.

And all on the expectation of exponential increases, ad infinitum.

Ask not whether a dollar of debt covers a dollar of GDP, ask not whether GDP is an accurate measure, ask not about peak, plateau, decline, depletion......... But we got a good rating. The deckchairs are in better nick than anyone else's. Good stuff.


During the media-annointed '9 years of neglect' I never ceased to read about how National had dramatically increased our national debt. It was certainly a theme that was constantly harped on about by Labour's on-line army. Endless comments on the same theme, it seemed to be their singular obsession and something that really alarmed them.
How surprising to see virtually nothing written these days about our ballooning national debt: on-line commentary seems very quiet since 2017 and almost nothing in the media. Where are all those people who were so deeply concerned? And here is Labour's Mr Robertson speaking of "relatively low public debt". It's all a bit of a head-scratcher that we had a terrible burden of debt under one government, and now with many billions of dollars added-on....we discover the debt is actually "relatively low".

Every which angle I look at GR behaviour leaves me thinking this all just cannot be explained by stupidity or incompetence... Its all just too contrived

I'm still not sure why we needed to go from $10b to $60b of Government debt during those 9 years. According to the RBNZ, the total EQ bill was approx $40b incl infrastructure. $26b had been paid out by insurance companies by 2015. This is while they cut funding to core essential services and cut income taxes, particularly the top marginal rate, to one of the lowest in the OECD. I thought National were better when it came to the finances.

But I do agree with you, why isn't this Government being held to the same account? Hopefully ACT make a lot more noise this year.

"Labour's on-line army"

Nailed it. Someday a reporter will drill into how it was mobilised.
It was like having a conversation with a flock of seagulls for a while there.

I'm pretty sure the CTU and individual Unions were behind it. They have a lot of overt (holding most of the cards when picking the Labour leaders) and covert (financial and motivated footsoldiers) power.

"NZ dollar hits 34-month high."

The bane of every farmer and exporter. RBNZ should watch carefully the export numbers and cut the OCR if necessary. The credit rating is only as good as the national income.


'Cut the OCR'. Ridiculous.

At the moment our farm commodity prices are steady or rising so it isn’t looking too bad.
The meat works have given me a 5c/kg pay rise this week for my bulls.
Certainly not worth further breaking the housing market for.

Roger, picks up his quill and questions whether he should use it to write another weekly commentary on the travels of the NZD or instead repeatedly stab the saveloy drowning in its sauce.

I remember S&P from that movie - what's it called ... The Big Short. The blind lady who couldn't see a problem with triple A CDOs. I've heard they've made changes since then. She's now not only blind, but has emphysema.

NZ - the best economy of a very, very, very bad bunch. Really, is there room to celebrate such a BS rating in a world marginalizing the less well off whilst the rich get richer from owning property?
It feels like we are celebrating because we are by chance on the highest point on the Titanic, regardless we still sink with everyone else when the sh1t hits the fan.

Our brown stinking debt pile has the most glitter on it.

"...proactive policymaking and decades of structural reforms..." Have those wonderful sausages confused us with another country? The defining feature of New Zealand governments for over a decade has been that policymaking has been glacial and reform almost non-existent.

That just classic World Bank-speak. Structural Reforms is code for Screw the Locals. We did all that from 1984, and the rich got richer while the poor got the picture. We are past that now, it was a social failure but worse than that, it was based on Capitalism, and Capitalism was based on resource draw-down. Meaning it was unmaintainable.

Yossarian would have approved, though. You get to borrow cheaper money, if you borrowed cheap money to pretend your economy is growing by which measure you get to borrow.....

PDK - Are you suggesting that NZ should have stayed on the same financial track in 1984.
I don't know how old you are but through total mismanagement by Muldoon and co NZ was broke, it was insolvent.
All the farming and export subsides has to go, famers had to be connected to markets to produce what markets wanted not living off subsides, manufactures were living off subsides and being inefficent.
Unions still had way too much power over the economy, hence private employment contracts.
Government departments eg railways, post office etc were so badly run, starved of Capital and rife with theft that they had to be privatized.
It was a time of great change that the economy had to change away from central Muldoon control to open markets.
It's these changes that S+P ref to.
And yes people loose jobs me included.
If you think these where not needed then tell me what should we have done ?

Surely you know full well that's not what was meant. Imagine if we'd changed course to even a slightly more sustainable system 40 years ago.
Loved the "rife with theft" bit. So inefficient to thieve small quantities when you can go the full Hart or FayRichwhite neolib mode.
In Muldoon's NZ the gvt may(?) have been insolvent, but all that happened post that is private debt rocketed past to the ridiculous point we have now.

I'd be much happier with a crashing housing market, high unemployment, more business failures and less debt, thank you.

Unless it was YOUR house, YOUR job or YOUR business.

While retail sales contract 3% QoQ. Totally ignored in the media of course......

While economists claim robust economic recovery the proportion of working age NZers on some form of government welfare payment are up year on year.

'Middle class welfare' has been a thing since HC kicked it off, and then there is another whole line of support coming via interest rate suppression & housing subsidies. No wonder we can't balance the books anymore.