International credit rating agency Moody's Investors Service says the outlook for New Zealand's Aaa credit rating remains stable but it expects economic growth to be more subdued than the 3.3% annual rate seen between 2000 and 2007.
(Updated with full statement attached)
Read Moody's statement below:
Moody's Investors Service says that the outlook for New Zealand's Aaa rating remains stable, anchored by the government's low debt relative to most other Aaa-rated countries and Moody's belief that the country will continue with fiscal and monetary discipline as well as market-oriented policies.
"At the same time, New Zealand's Aaa ratings are based on the country's high economic strength, very high institutional and government financial strength, and very low susceptibility to event risk," says Steven Hess, a Moody's Vice President and Senior Credit Officer.
" Moody's believes that the government, of whichever party, will maintain a policy of low debt and fiscal soundness." "
Although the recent global financial crisis did affect the country and government finances, the consequences were less severe than in a number of other Aaa-rated countries. New Zealand's flexible and market-oriented economic policies have supported economic performance that has become stronger over time and less subject to external shocks, ," adds Hess.
Hess was speaking on the release of Moody's annual update -- which he authored -- on New Zealand, which looks in detail at the key rating factors, in all of which New Zealand scores well.
Looking ahead, economic growth is likely to remain sound, but will be more subdued than the average annual rate of 3.3% seen from 2000 to 2007, the report notes.
As in some other countries, household leverage had reached a fairly high level prior to the recent crisis, and less willingness to take on additional debt may limit the growth of household spending.
"The government also faces the prospect of an extended period of fiscal consolidation after the ending of economic stimulus. Thus, although exports may provide some underpinning of growth, and business investment should revive, growth rates are likely to be lower than during the years leading up to the global financial crisis," says Hess.
With its fiscal position, the Moody's report notes the deficit is anticipated to decline and that the government expects to return to an operating surplus in 2016. As a result, debt will rise through 2015. In this context, gross central government debt as a proportion of GDP is forecast to rise to the 32-33% range during 2011-14 before beginning to decline, the report says.
However, the recent call on the government deposit guarantee and expenditure related to the Canterbury earthquake may result in a somewhat higher ratio, although not enough to significantly change the overall trajectory.