6 Aug 2012

Ratings agency keeps NZ at AA

10:01 am on 6 August 2012

Standard & Poor's has reaffirmed New Zealand's AA credit rating, but warns there might be renewed pressure if the country's external debt levels deteriorate further.

The agency says the current rating is appropriate given the economy's outlook, New Zealand's fiscal strength and the strength of its banks, all of which counter threats from high external debt and vulnerable commodity markets.

It says more pressure could come on the rating if New Zealand's very high private-sector debt continues to rise.

S&P cited high private debt when it cut the country's credit rating by one notch late last year.

Sovereign analyst Kyran Curry says the Government's finances have been hit by the global slowdown and the costs of the February 2011 earthquake have exacerbated the impact of a domestic recession.

The Government has made a return to budget surplus by 2014-15 an economic and political priority.

Finance Minister Bill English on Friday welcomed the news. He said New Zealand is one of only nine countries with a rating of AA, though he acknowledged the risks associated with the high level of household debt.