Ratings agency praises NZ economy
An international ratings agency has kept New Zealand’s credit status at the highest possible level.
Moody’s Investors Service has affirmed the Government’s triple-A issuer rating with a stable outlook and said it was in a strong fiscal position compared to other countries.
‘‘We expect New Zealand’s economy to be among the fastest growing Aaa-rated economies in coming years,’’ it said.
Factors behind the rating included New Zealand’s economic resilience against overseas and domestic shocks, which remained ‘‘very high, supported by strong growth’’.
The country was also praised for its ‘‘proactive’’ policies, a vigilant central bank and stable political system which meant it had effective tools to ‘‘shoulder downside scenarios’’.
Moody’s noted that strong population growth had bolstered the economy’s potential and that longer term, its growth could be higher than that of many other Aaa-rated countries.
‘‘As incomes in China and the rest of Asia continue to rise at a solid pace, demand for New Zealand’s products and services, including dairy, tourism and education, will also continue to support growth.’’
The country’s economy was small and open, and highly dependent on agricult- ural exports but in the event of a shock, the economy responded ‘‘swiftly and positively’’ to a weaker exchange rate and lower interest rates.
However, New Zealand was vulnerable in the medium term to a large overseas or domestic shock, ‘‘perhaps stemming from a natural disaster, a housing market correction or a sharp fall in global trade’’.
New Zealand’s weakness was its reliance on overseas borrowing and its high levels of household debt.
Moody’s seemed less concerned about New Zealand’s house prices, saying the Reserve Bank’s moves to cool the housing market had helped reduce the negative consequences of a potential housing downturn.
Further pre-emptive tightening measures were likely to be introduced to reduce that probability, it said.
Finance Minister Steven Joyce said the Aaa rating underlined ‘‘the benefits of all the work New Zealand has done over the last few years to strengthen our economy and our country’s finances’’.