Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 

S&P affirms New Zealand's 'AA' credit rating

S&P affirms New Zealand's 'AA' credit rating on solid economy, fiscal prudence; kiwi gains

By Paul McBeth

Jan. 20 (BusinessDesk) - Standard & Poor's affirmed New Zealand's credit rating, saying the economy's solid growth looks set to continue and the Crown's fiscal management remains prudent. The kiwi dollar gained.

The global rating agency kept the sovereign foreign currency credit rating at 'AA', local currency rating at 'AA+', and short-term rating at 'A-1', with a stable outlook, saying the nation benefitted from strong institutions, an effective government and credible Reserve Bank. The kiwi rose to 72.18 US cents from 71.84 cents immediately before the release.

"New Zealand benefits from a high-income and resilient economy, which we believe draws from decades of structural reforms and wage restraint," S&P analysts Craig Michaels and Anthony Walker said in a note. "We expect strong net migration to continue to support growth, through strong residential investment and solid consumption growth, while business investment is also likely to remain firm."

ASB Bank economists predict New Zealand's economy will grow 3.5 percent in 2017 as the nation's construction and tourism booms continue, and as a recovery in dairy prices revitalises a moribund rural sector.

S&P expects New Zealand's gross domestic product will continue to grow near the 2.7 percent pace in the year ended June 30, 2016. The rating agency predicts that expansion and currency appreciation over the past year will likely lift GDP per capita to US$39,000 in the 2017 fiscal year from US$34,000 in 2016.

Increased spending on residential property is seen as alleviating rapid house price appreciation in Auckland, which has seeped into other parts of the country, and while a correction in the housing market is still deemed to be an elevated risk, it's unlikely to heighten in the next two years.

"We believe the recent trend of higher repricing of home loans, in response to margin pressures and rising global yields, is likely to remove some cyclical demand from New Zealand's housing market, though we expect a number of structural challenges will ensure risks remain elevated," S&P said.

However, the threat posed by a downturn in the dairy sector had eased, reducing pressure on bank loans to those farmers. "Nevertheless, we expect that many dairy farmers will remain reliant on the extraordinary support of their lenders, given the surge in dairy sector debt in recent years," the analysts said.

S&P affirmed its 'stable' outlook on the prospect of the government's books either getting better or maintaining the status quo in coming years, having "made substantial headway" since the 2008 global recession and 2010 and 2011 Canterbury earthquakes.

The current account deficit is seen to remain in a range of 3-to-4.5 percent of GDP over the next few years due to cheaper imports, while external debt is seen to be stable at about 190 percent of current account receipts.

S&P said New Zealand's current account deficit is traditionally linked to funding for the nation's four major banks, which are Australian owned. The parent banks' ratings face downward pressure due to the negative outlook hanging over Australia's sovereign rating "and the increasing likelihood that we will revise downward our assessment of the government's supportiveness toward Australia's banking sector to supportive from highly supportive."

That could have a flow-on effect on the New Zealand subsidiaries and their cost of funding, although S&P said it expected local lenders "will retain ready access to external markets".

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Auckland Port To Recapture Gas: Union Calls On Ports To Stop Spewing Methyl Bromide

The Maritime Union of New Zealand welcomes the decision by Ports of Auckland to stop releasing methyl bromide emissions into the air. The move to fully recapture the toxic gas after fumigation sets a new benchmark for industry best practice. More>>

ALSO:

Retail: Banks Shoes Calls In Receiver

Banks Group, which runs 14 stores across the country under the brands including Banks Shoes and Shoe Connection, has been tipped into receivership at the request of director John Bank. More>>

ALSO:

NZ's Space Programme: Rocket Lab Makes It To Space (But Not Orbit)

Electron lifted-off at 16:20 NZST from Rocket Lab Launch Complex 1 on the Mahia Peninsula in New Zealand. It was the first orbital-class rocket launched from from a private launch site in the world. More>>

ALSO:

Earlier:

Budget: Irrigate (Good Times, Come On!)

Additional grant funding of $26.7 million over the next three years plus a capital boost of $63 million towards irrigation investments in Budget 2017 will deliver economic and environmental benefits through better use of water... More>>

ALSO:

Silver Fern Farms: Proposal To Close Fairton Sheepmeat Plant

Silver Fern Farms has advised its people of the proposal to permanently close the site, and has discussed potential transfer options to its other sites in the region as part of the consultation process...
More>>

ALSO: