14 Jan 2009

Currency rating change will make life tougher for business -Roundtable

11:10 am on 14 January 2009

The Business Roundtable says a change in outlook for New Zealand's foreign currency rating will make life tougher for many New Zealand businesses.

The international credit agency Standard & Poor's has cut New Zealand's foreign currency rating outlook from stable to negative - citing imbalances in the economy.

The dollar fell nearly 2% to 56.3 US cents on the news on Tuesday. It also touched a one-month low against the yen.

On Wednesday morning, the dollar was hovering around the 55 US cents mark.

The Business Roundtable says foreign investors will now view New Zealand as a riskier investment and that will hurt businesses, who survive on funding from overseas.

It says if businesses are forced to pay more to produce merchandise, the end cost for consumers will be higher.

Milford Asset Management analyst Brian Gaynor says it's not the first time the health of the New Zealand economy has been questioned by overseas agencies.

However, the Bank of New Zealand says New Zealand is being 'picked on' by Standard & Poor's.

Govt view

Finance Minister Bill English told Summer Report the international forecast has deteriorated further since the last economic and fiscal update was published.

Earlier, he said the Government needs to make sure spending is under control.

He said the Government will need to carefully balance the demand for fiscal stimulus against taking on further debt.

Mr English said the change in the credit rating outlook follows similar revisions for Spain, Ireland and Greece. He said the change follows complacent policies and ill disciplined spending by the former Labour Government.