Well that was quick. The worst case scenario was NZ get a credit downgrade which would just put $600 million a year down the drain. The middle scenario was we remain on negative outlook, and the best case scenario was we get taken off negative outlook, which S&P has just done according to NZPA:
S&P said today that the budget delivered a “sound” outlook.
“The change in the outlook on the foreign currency rating reflects our view that the measures announced in today’s budget will support stabilisation in the government’s fiscal position over the medium term,” S&P credit analyst Kyran Curry said.
Fiscal deficits were offset against the deferral of personal income-tax cuts and savings measures associated with public sector reforms and service delivery, he said.
“The Government estimates that additional debt required to fund the deficits to be 38.7 percent (of GDP) by 2013. The successful delivery of this strategy — returning the operating position to surpluses over the cycle and maintaining low debt — is consistent with maintaining the `AA+’ foreign currency rating on New Zealand.”
A credit downgrade would not only have cost taxpayers $600 million a year more – it would also have cost most NZ businesses more with their financing – which would have an impact on employment.