Hon Dr Michael Cullen
Minister of Finance

16 July 2007 Media Statement

Rating review underlines need to save

Finance Minister Michael Cullen today welcomed the decision of Standard & Poor’s to reaffirm its AA+/A-1+ foreign currency and AAA/A-1+ local currency sovereign credit ratings on New Zealand.

“This is good news and underscores the wisdom of the Labour-led government’s prudent fiscal management and especially our savings policies,” said Dr Cullen.

“Standard & Poor’s notes the country’s ‘strong fiscal position and conservative macroeconomic management’ are helping to offset the risks of the large current account deficit.

“It further notes that the government’s low net debt position provides a strong buffer to any potential external shock.

“However, Standard & Poor’s remains concerned about the level of consumer spending which is aggravating the current account deficit and increasing our debt with the rest of the world.

“We have an appetite for debt when we should be saving more. This is a timely reminder of why KiwiSaver is so important to the future financial security of individuals and the well being of our economy.

“National seems blind to the issue as it keeps hinting it will scrap the extension to KiwiSaver.

“It should take heed. Standard & Poor’s warns ‘any weakening of government fiscal policy is likely to lead to a downgrade in the next few years.’

“That’s precisely what National is proposing. It’s sticking to promises of large scale tax cuts, financed by an increase in overseas borrowing. That kind of reckless economics will aggravate current imbalances and put more pressure on exporters through higher interest rates and the exchange rate.”

ENDS

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