BUDGET 2012: S&P affirms NZ's credit rating after budget forecast for return to surplus
By Paul McBeth
May 24 (BusinessDesk) - Rating agency Standard & Poor's has affirmed New Zealand's AA foreign currency credit rating, saying the budget is the latest in a series of baby step towards getting the government's books back in order.
S&P, which cut New Zealand's rating last year, said Finance Minister's Bill English's budget is the "latest incremental step toward consolidating the government's fiscal settings after four years of deficits" from the country's recession and costs relating to the Canterbury earthquakes.
"The fiscal outlook faces a number of challenges, including renewed uncertainties surrounding trading partner growth and the outlook for agricultural commodity prices, which may further pressure revenues and hamper the government's efforts to stabilise its fiscal position," credit analyst Kyran Curry said in a statement.
English today charted the way back to an operating surplus in 2015 by hiking the excise tax on tobacco, giving Inland Revenue more scope to chase tax dodgers and holding off auto-enrolments in KiwiSaver. The budget will introduce just $26.5 million of new spending this financial year, and will look to make $4.49 billion of cuts over the next four years.
S&P retained the stable outlook on New Zealand's rating, reflecting the expectation of more fiscal consolidation, against the backdrop of high private sector external debt.
The rating agency has ignored mutterings from Opposition parties about introducing exchange rate controls and tinkering with monetary policy target agreements, saying it believes the current fiscal strategy will remain "supported by strong bipartisan and policy and community backing for conservative public finances."
The New Zealand dollar was little changed after the budget, recently trading at 75.17 US cents from 75.11 cents immediately before its release.