Credit ratings agency Fitch Ratings’ decision to revise New Zealand’s AA sovereign rating outlook from stable to positive is a vote of confidence in the New Zealand economy and the Government’s programme, Finance Minister Bill English says.
The positive outlook, which was announced overnight, indicates the likely direction of the credit rating over the next year or two, although it is not confirmation that a change will occur.
“As Fitch notes, the Government’s fiscal consolidation and its track to surplus in 2014/15 are strengthening the resilience of New Zealand’s credit profile,” Mr English says.
“Furthermore, it confirms that the Government has a credible plan to increase its fiscal surplus in the years ahead and to reduce net core Crown debt to 20 per cent of GDP by 2020.
“And Fitch comments that New Zealand’s economic policy framework, business environment and standards of governance rank among the world’s strongest from a credit perspective, warranting ‘high grade’ sovereign ratings.”
In its ratings update, Fitch also notes that New Zealand’s main vulnerabilities relate to its high net external debt and dependence on commodity exports.
“The Government remains focused on working with New Zealand households and businesses to lift our economic competitiveness,” Mr English says.
“We have made some good progress in addressing our longstanding vulnerabilities, with both the current account deficit and New Zealand’s net international liabilities substantially lower than they were five years ago.”
Alongside Fitch’s AA rating with a positive outlook, New Zealand is rated Aaa with a stable outlook by Moody’s and AA with a stable outlook by Standard and Poor’s.
This is a vote of confidence in the government’s programme and the direction it is taking New Zealand.
It’s not just academic. The more positive the view of the ratings agencies the lower the risk for lenders and that has an impact on interest rates.