S and P affirms NZ’s AA+ rating; sound fiscal position makes up for private sector indebtedness
New Zealand's AA+ credit rating has been affirmed by Standard & Poor's, which says the nation's economic resilience and sound fiscal position makes up for high external imbalances, household and farm debt, and reliance on commodities.
S&P also affirmed a stable outlook for the country's debt rating. Local and foreign currency short-term ratings were affirmed at A-1+.
"The ratings on New Zealand reflect the country's fiscal and monetary policy flexibility, economic resilience, public policy stability and financial sector," S&P credit analyst Craig Michaels said in a statement.
"Moderating these strengths are New Zealand's very high external imbalances, which are accompanied by high household and agriculture sector debt, and dependence on commodity income," he said.
New Zealand was a "high-income and resilient economy" as a result of "decades of structural reforms and wage restraint," Michaels said. He forecast per capita gross domestic product, at US$37,200 in 2013, to grow at an annual pace of about 1.5 percent in the next few years.
Growth would be driven by the rebuild of Christchurch, and the stimulus of low interest rates and strong underlying demand in Auckland's housing market.
S&P reiterated its view that public debt was at manageable levels while private sector debt, especially in the banking system, was high.
"Overall, the economy's external debt, net of official reserves and financial sector external assets, amount to an estimated 260 percent of current account receipts in 2013," Michaels said. "This ratio is among the highest for rated sovereigns."
While the nation's Australian owned banks have a high reliance on external funding, "we believe that these banks will retain ready access to external markets," he said.
The nation's current account deficit is forecast to rise to 6 percent of GDP by 2015 from almost 5 percent in 2012.
New Zealand's ratings are also underpinned by its strong institutions, including a Reserve Bank that has "strong credibility regarding its inflation mandate and its supervisory role," Michaels said.