2 Sep 2010

NZ rated well placed to handle economic crisis

10:22 pm on 2 September 2010

The International Monetary Fund has assessed the New Zealand Government finances as amongst the strongest in the world, saying it well placed to deal with an economic crisis.

The Washington-based organisation says the strong position is based on the New Zealand Government's low level of debt. It is the second lowest of the 23 developed countries it analysed. Australia has the lowest debt.

The IMF says countries have different thresholds for government debt above which debt can spiral out of control.

It says New Zealand is one of a handful of developed countries which are operating well below that threshold. Other countries include Norway, South Korea and Denmark.

The countries have room to increase debt in a downturn without facing ruinously high interest rates and debt spiralling out of control.

The IMF analysis does not include New Zealand's private sector debt - among the highest in the developed world.

New Zealand's high overall debt has been highlighted as problem by credit ratings agencies and the Government.

Greece, Italy, Japan and Portugal are considered the least well placed to deal with a downturn in the IMF analysis.