S&P cuts New Zealand rating one notch

30 Sep 2011, 12:42 pm   -   Source: AAP
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S&P cut New Zealand's long-term foreign currency rating to 'AA' from 'AA ' and it long-term local currency rating to 'AA ' from 'AAA'. (AAP)

S&P cut New Zealand's long-term foreign currency rating to 'AA' from 'AA ' and it long-term local currency rating to 'AA ' from 'AAA'. (AAP)

Standard & Poor's has joined Fitch in downgrading New Zealand's credit rating one notch, citing high external debts and the Christchurch earthquake.

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Standard & Poor's joined Fitch in downgrading New Zealand's credit rating one notch on Friday, citing high external debts and the rebuilding cost after the Christchurch earthquake.

S&P cut New Zealand's long-term foreign currency rating to "AA" from AA+" and it long-term local currency rating to "AA+" from "AAA".

The downgrade "follows our assessment of the likelihood that New Zealand's external position will deteriorate further at a time when the country's fiscal settings have been weakened by earthquake-related spending pressures and fiscal stimulus to support growth", it said in a statement.

The ratings agency said New Zealand's external debt, which hit 70 per cent of annual gross domestic product (GDP) in June, was exacerbated by high household and farm sector debt, a reliance on commodity income, and an ageing population.

S&P sovereign credit analyst Kyran Curry said the outlook for New Zealand's rating was stable but could come under pressure again if the country's external position continued to deteriorate.

"The stable outlook balances the stabilisation we expect between the government's debt profile over the medium term and risks associated with the country's high external debt," he said.

New Zealand faces a massive reconstruction task after February's Christchurch earthquake, which levelled parts of the country's second largest city and killed 181 people.

The cost of rebuilding has been estimated at more than $NZ15 billion ($A11.88 billion).

Earlier, Fitch also downgraded New Zealand one notch to "AA", also expressing concern over high external debt.

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