New Zealand’s Aaa sovereign credit rating with Moody’s Investors Service is underpinned by the nation’s economic strength and low vulnerability to event risk, the rating agency said today.
Moody’s said the government’s fiscal and debt positions were very strong, and any threats from the nation’s high level of private debt was mitigated by the fact that the majority of those liabilities are held by the nation’s Australian-owned banks.
Still, New Zealand’s total external liabilities equalling 159 percent of gross domestic product is the nation’s biggest vulnerability, and prompted downgrades by rival rating agencies Standard & Poor’s and Fitch Ratings at the end of September.
“A strong fiscal framework, which has supported the successful track record of fiscal prudence under governments of both major political parties, provides some assurance that the budget balance will return to surplus by the middle of the decade,” Moody’s said. “The negative net international investment position has been large for many years without substantially affecting the government’s finances.”
The government has worked to keep its net debt below 30 percent of GDP, even as it borrowed a record $20 billion last financial year, and Moody’s said set to peak below the average ratio of other triple-A rated nations.
The left often complains that almost all our banks are owned by Australians but Moody’s sees that ownership as mitigating the high level of private debt.