NZ passes Moody's muster

By Phil Boeyen, ShareChat Business News Editor

Wednesday 12th December 2001

New Zealand has received a positive end-of-year report card from ratings agency Moody's Investors Service.

The agency says has reaffirmed the country's Aa2 foreign currency country ceiling in and the Aaa rating for the government's domestic currency debt obligations in its annual credit report. The outlook is stable.

Moody's says the ratings reflect New Zealand's sound macroeconomic framework, a low level of public sector debt, and the benefits of an open and flexible economy.

"Strong monetary and fiscal policies underpin New Zealand's ratings at their present levels and offer a stable outlook," says the report's author, Moody's vice president, Steven Hess. "This is despite uncertainties in the external environment now affecting the country."

However Mr Hess says while the country entered the current global economic downturn with a still-sound fiscal framework and an improving balance of payments and growth picture, the outlook for the year to come presents a number of uncertainties.

"Commodity price developments helped the country's traditional exports in the recent past but are now vulnerable to international commodity price cycles that are expected to be less stable. Both tourism and demand for the country's exports may decline in 2002."

The report says factors affecting the government's fiscal position include pension obligations, which will now be partially funded under a new superannuation scheme, and the strains that followed bad investments by Air New Zealand.

"Nonetheless, Moody's believes that, despite these developments, New Zealand's fiscal framework is sound. The level of public sector debt in relation to GDP remains among the lowest of the advanced economies," says Mr Hess.

Finance Minister Michael Cullen has welcomed the annual report and says it endorses the country's macroeconomic and fiscal framework.

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