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BUDGET 2013 Rating agencies happy with NZ fiscal position after budget

Thursday 16th May 2013

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The major international rating agencies have given Finance Minister Bill English the all-clear in today's budget, which sticks to reaching an operational surplus in the 2014/15 year.

Fitch Ratings, Moody's Investors Service and Standard & Poor's all said their respective sovereign ratings for New Zealand were unaffected by English's fifth budget, and were generally in line with expectations.

The latest Treasury forecasts are for a margin-of-error operating surplus before gains and losses of $75 million in 2014-2015, in line with the estimate in December's Half Year Economic and Fiscal Update. Net debt is forecast to be $57.9 billion, or 27.1 percent of gross domestic product in the year ending June 30, before reaching a peak in 2015 at 28.7 percent.

S&P said the New Zealand government's fiscal balance was "a little improved" compared to its last forecast with smaller deficits than previously anticipated, leading to a lower net debt as a proportion of the economy. That was consistent with S&P's AA foreign currency rating with a stable outlook.

Fitch said it was encouraged by the government's commitment to fiscal consolidation, and said today's budget wouldn't alter its AA rating assigned to New Zealand.

Likewise, Moody's said the "deficit trajectory is not very different from that which the government previously projected" and was supportive of an Aaa government bond rating.

Fitch and S&P both cut New Zealand's credit rating one notch in 2011 after the Canterbury earthquakes punched a hole in the government's balance sheet, and as the nation retained a high level of private debt. Moody's kept New Zealand's Aaa rating, with a stable outlook, though it measures sovereign creditworthiness differently to its peers.

BusinessDesk.co.nz

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