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John Key
Prime Minister John Key does not think the country is headed for a credit downgrade when the government announces its Budget on Thursday.
Standard and Poor's credit rating agency is currently in New Zealand, ahead of the Budget announcement, to decide whether to take the country's AA+ rating off negative watch and back to stable, or whether to downgrade it.
Standard & Poor's analyst Kyran Curry told The New Zealand Herald that the agency expects the government to record operating surpluses within the next three to five years.
With this in mind, the agency will be looking for strong messages in the Budget that the government is committed to reining in debt - which currently sits at -$7.7 billion - and taking a fiscally conservative approach to spending.
"Following what's been happening in England...the last thing we need to be doing is drawing undue attention to ourselves with any borrowing that might be coming up," says market analyst Charles Abraham.
Standard & Poor's last week revised the United Kingdom's credit rating outlook from stable to negative, though it retains its triple-A rating for the meantime.
Abraham says Finance Minister Bill English will be walking a fine line between efforts to stimulate the economy and not jeopardising New Zealand's credit rating.
However, Key is confident English has balanced the government's fiscal responsibilities.
"Bill's done a very good job. He's got on top of the debt curve...he's preserved all of those entitlements - 0% loans, Working for Families...pensions," says Key.
If a downgrade were to happen, it would add 1-2% of interest on the amount the government borrows, which is around $600 million each year.
This, says Key, is to be avoided at all costs.
"That's every homeowner, every business, everybody paying 2% more. That would be irresponsible in my view for the government not to act," Key says.
He says while he personally does not believe New Zealand's
credit rating will be downgraded, as a consequence there will be
much less spending in this year's Budget.
TVNZ has comprehensive coverage of Budget 2009. The ONE
News Budget special will feature Bill English's Budget speech, pre
and post-Budget analysis and reaction. The special will be streamed
LIVE on tvnz.co.nz, where we will have full text coverage of the
Budget announcements.
