Wednesday 6th August 2008
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"New Zealand's high net external indebtedness leaves the banking system very reliant on non-resident funding," said Kyran Curry, a sovereign analyst at S&P, in a statement. Still, the banking system "remains profitable, adequately capitalized and demonstrates good asset quality by international standards."
New Zealand's annual current account deficit narrowed less than expected in the year ended March 31 to NZ$13.79 billion, or 7.8% of gross domestic product. That's a higher ratio than in Australia, where the gap equals 6.5% of GDP.
Curry said the government isn't likely to relax its fiscal discipline, even if another party wins power at this year's elections.
S&P also affirmed New Zealand's local-currency rating of AAA.
The rating review "is a vote of confidence in New Zealand in these challenging international economic times," Finance Minister Michael Cullen said in a statement. "These past 12 months have seen considerable pressures develop in international credit markets."
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