NZ in good position to weather global turmoil - John Key

New Zealand is in a relatively good position to weather the global economic turmoil following the US credit downgrade and the ongoing eurozone debt crisis, Prime Minister John Key says.

Speaking on National Radio this morning, he said: "New Zealand is unquestionably in much better shape than many other countries. We’ll be back in surplus within 2-3 years, our overall levels of government debt are still low, notwithstanding that we had to pay a significant burden because of the Christchurch earthquake, our unemployment levels are low relative to the developed world."

"Secondly what I’d say is that there’s absolutely no room for the government to be running excessive levels of debt."

On his regular TVNZ Monday morning slot, Mr Key was clear that the downgrade is serious fo the United States. 

"If you have a look at the comments by the S & P rating agencies, what they are actually saying to America is 'We're not saying you will not achieve the $2.1 trillion worth of cuts that the Congress and the Senate has passed. What they are saying is, you are not doing enough. You need to do twice as much," he said.

"What that means is the United States will need to change because when you are on a negative outlook, the ratings agencies are saying you have two or three years to get your books in order." 

Mr Key does not believe New Zealand's economic growth will be stopped in its tracks as Australia remains the country's largest market and ‘for the most part we are competitive there against Australia" and higher commodity prices offset some of the appreciation of the NZ/US exchange rate.

“But nevertheless from the government’s point of view we’re always conscious of that nag. We may not be able to control the level of the exchange rate but what we can do is try and look at other parts of the economic picture that effect those companies and look to take pressure off that way. That’s everything from reform of the labour market right through to investment in infrastructure and really trying to lift productivity," he told National Radio.

Commenting on the likely market reaction to the US downgrade, Mr Key said it would be a volatile period in the medium term - not helped by summer holiday breaks in the US and Europe meaning markets have less liquidity than usual.