Improved S&P outlook 'underlines' position of NZ economy, says Grant Robertson

Thursday, 31 January 2019

NZ's real annual economic growth per capital of 1.4 per cent is ahead of 'its peers', says S&P.

New Zealand's economic outlook has received a vote of confidence from credit ratings agency Standard & Poor's.

S&P has upgraded its outlook on New Zealand to 'positive' from 'stable'.

Finance Minister Grant Robertson said the change underlined the position of New Zealand's economy.

'I do think it's really important to remember the fundamentals of the New Zealand economy are strong. We have extremely low levels of debt compared to the rest of the world.

'Of course there's always more to do … [but] I feel we are well placed to manage what's in front of us this year.'

S&P's improved outlook is a vote of confidence in the direction of the NZ economy.

S&P's positive outlook reflected its view that the general government budget could be in surplus in the early 2020s.

The ratings agency said it expected real economic growth to slow to 2.8 per cent per year between this year and 2021, down from 3.5 per cent over the past few years, as immigration fell and population growth slowed from its record level of more than 2 per cent.

But New Zealand's 'per capita' economic growth of about 1.4 per cent continued to 'outpace' the 1 per cent growth in countries with similar credit ratings.

'Accommodative monetary policy, population growth, higher wage outcomes and higher government spending' and a decline in the New Zealand dollar, was continuing to support growth, it said.

'We don't believe trade tensions between New Zealand's major trading partners will currently have a substantial impact on the country's economy and external performance, particularly given that key exports are imported for domestic consumption in China, rather than for re-exporting.'

But in a comment less favourable to the Government, it said 'headwinds' included business confidence remaining weak due to 'policy uncertainty'.

Risks stemming from rising property prices and household debt appeared to have stabilised since 2017, it said.

S&P reaffirmed its 'AA/A-1+' and 'AA+/A-1+' foreign and locally-denominated credit ratings for New Zealand sovereign (Government) debt.

An improved outlook can have a direct impact on the finances of the Government and businesses as it may make it easier for them to borrow money at a lower rate interest, given it indicates to lenders that they can have more confidence debt will be repaid.

The New Zealand dollar jumped about three-quarters of US cent on Thursday to trade above US 69c for the first time this year.