Credit rating agency confirms NZ economy sound
Credit rating agency Moody's annual report on New Zealand
confirms that we
have a strong, adaptable economy, Treasurer Bill English said today.
"That is exactly
what National's economic framework is designed to
and it is what New Zealand needs to move into the 21st century.
"The message from the report is that
we must continue to have policies that
drive growth, and that we need sound government financial management behind
that. Running surpluses and repaying debt are important, so any reduction in
surpluses should be about improving our economic performance.
the country's credit rating of Aa2, the same as
reflects the adaptability and improved performance of our economy from
fifteen years of structural reforms and a prudent macroeconomic framework.
"Moody's also said the Government's record in managing
public finances was
impressive relative to other OECD countries. The healthy fiscal position and
the government's low debt burden supports the Aaa rating on the government's
responsibility is important to maintain investor
according to Moody's. This is because the high current account deficit
leaves us exposed to external developments and potential shifts in market
"But New Zealand's Aa2 credit rating is not
under threat from our current
account position. Moody's confirmed in the annual report that our current
credit rating fully captures their concerns about New Zealand's external
"They noted a number
of factors which help alleviate New Zealand's
vulnerability, including our floating exchange rate, the widespread use of
hedging against exchange rate movements, and the fact that much of New
Zealand's external debt is in domestic currency and/or accounted for by
"The ratings agency also
commented on New Zealand's reliance on agricultural
exports, which has contributed to weakness in our trade balance as the
economy has been affected by drought and soft world prices. Treasury's
latest forecasts are for exports of meat and dairy products to grow by 12%
next year and this will help lead to a reduction in the current account
"Over the longer
term, Moody's noted the importance of boosting private
savings. In their opinion, future reforms to the welfare system and the
amendments to the tax structure envisaged by the government could lead to an
increase in savings in New Zealand.
"We recognise the importance
of strengthening New Zealand's export sector.
This can best be achieved by providing an environment in which all firms can
excel. Low taxes, flexible labour markets, and reducing costs to business,
are policies that will achieve this," said Mr English.