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Stacking money - Source: ONE News
New Zealand's economy has emerged as the one least affected by the global financial crisis, while Australia's performance is dubbed as "middling" in a study of international country debt by Westpac Banking Corporation.
New Zealand takes out top ranking, in equal place with Turkey, in the study of 15 nations and their sovereign debts, with Austria and Italy in third and fourth place.
Australia has been ranked with Britain, due to concerns about its government debt and the ability to keep its fiscal accounts in balance.
The US is judged a better risk than Australia and Britain, while Ireland, Greece, Japan, Spain, and Germany are judged as most at risk.
The worst is Greece, which is desperately trying to refinance its debts and has introduced severe austerity measures.
In its study of sovereign debt, the Westpac report says one way to consider the financial strength of a country is to consider how its government accounts changed prior to the global financial crisis.
"Countries that had higher debt-to-GDP ratios would, all else equal, have less shock-absorbing capability going into a downturn," Westpac global foreign exchange strategist Lauren Rosborough wrote.
"Similarly, countries that had deteriorating fiscal positions at the height of the global boom had less flexibility for expansion in the economic slowdown." Due to these factors, Westpac said Ireland, Greece, and Britain were the most vulnerable going into the crisis. "At the other end of the spectrum was Australia and Germany," the report said.
Another way to measure a country's risk was to look at its debt affordability, as measured by its debt-to-revenue ratio.
Debt affordability improved for the US but dramatically worsened for Ireland and Portugal over the past four years.
"Another simple way to define debt affordability is the future change in the unemployment rate," the report said.
It said Spain's unemployment rate, currently more than 20%, was expected to worsen over the coming two years, with Greece and Ireland also worse off. By contrast, New Zealand "will have an improving unemployment rate by 2011", it said.
Westpac said no single factor drove the NZ result.
"Rather, the 2006 gross debt levels were relatively moderate, unemployment is anticipated to improve...and the fiscal deficit is anticipated to deteriorate only modestly over the forecast horizon," Westpac said.
As for Australia, it said: "Westpac's forecast rise in the unemployment rate out to 2011 and an increase in the real interest rate since 2006 will act as headwinds to Australia's ability to keep its fiscal accounts in balance."
Westpac New Zealand was not involved in the report.
