Moody's sees no impact from quake on NZ's rating

Wednesday 23rd February 2011

The impact on the Government's finances from the magnitude 6.3 earthquake in Christchurch on Tuesday is being monitored by Moody's Investors Service but the credit rating company currently sees no reason to change the country's Aaa rating.

Tuesday's earthquake would have a larger effect on government borrowing than the one in September, and debt ratios would deteriorate further, but would remain in line with Aaa-rated peers, Moody's said.

New Zealand's ability to support higher government debt was perhaps somewhat lower than in other countries, given the country's relative lack of economic diversity and reliance on external funding. But its debt metrics would not become incompatible with the country's rating level.

The budget in May would provide more information on the impact of the earthquake.

"Moody's notes that the rise in government debt resulting from last September's earthquake - and which will come to about 1% of gross domestic product - has meant that the peak level of debt projected for the mid-part of this decade is correspondingly higher," said Steven Hess, a senior credit officer at the credit rating company.

"However, we also note that, even with this higher projected level of debt, New Zealand government debt levels are well below the median for Aaa-rated governments globally," Hess said.

The earthquake mainly damaged the central business district of the city.

NZPA

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