Hon Dr Michael Cullen

Minister of Finance

6 August 2008 Media Statement

Standard & Poor’s ratings review underlines importance of saving

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

“Standard & Poor’s ratings review is a vote of confidence in New Zealand in these challenging international economic times.

“Everyone knows that these past twelve months have seen considerable pressures develop in international credit markets in the wake of the sub-prime mortgage crisis in the United States.

“It is vital for the well-being of all New Zealanders that their governments maintain investors’ confidence in New Zealand as a place to invest in and to do business with policies such as encouraging a stronger personal savings culture, by maintaining the strong financial position of the Crown itself and by ongoing steps to strengthen our capital markets,” Dr Cullen said.

“But there is no room for complacency. In its statement today the international ratings agency noted the government’s strong fiscal position, our nation’s political stability and our flexible resilient economy.

“But it has to be said that it also noted some of the challenges we face as a small, open trading economy, such as our high national level of external debt and weak external liquidity,” Dr Cullen said.

“What is I hope clear to most New Zealanders is that given the current stresses in the international financial system, it would be a risky and reckless strategy for any serious political party to propose to actively, purposefully go out and flood the market with a whole lot more New Zealand dollar-denominated debt,” Dr Cullen said.

At the week-end, the National Party released its economic programme which amounted to more overseas borrowing and a promise to eventually sell the only major nationwide New Zealand-owned retail bank, KiwiBank.

Note to editors: NZ’s current S&P ratings were put on a “stable outlook” in March 2001. That was a recovery from S&P’s decision to put our rating on negative outlook in 1998.

ENDS

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