NZ off negative outlook

May 28th, 2009 at 5:20 pm by David Farrar

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 has just done according to NZPA:

International agency Standard and Poor’s has cast a favourable verdict on the , upgrading New Zealand’s outlook from negative to stable. …

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.

Tags: , ,

30 Responses to “NZ off negative outlook”

  1. metcalph (1,430 comments) says:

    Presumably the Government revealed to S&P the overdraft facility it had with Westpac…

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. Michaels (1,318 comments) says:

    What a difference a banker makes instead of tossers :-)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. Grant Michael McKenna (1,159 comments) says:

    Richard Seddon had 13 years, 44 days in office. How many will John Key serve? Given the skill with which this budget has been managed I’d say that the Key/English team has a chance of taking Seddon’s record.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. Bevan (3,924 comments) says:

    So with this change from negative to stable – does that mean our interest payments are less?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. Friedman4Eva (2 comments) says:

    If anything, the upgrade suggests they could have kept the tax cuts and not even touched expenditure.

    The tax cuts that have been shelved cost under $1 billion. Government spending in the 09/10 year is over $65 billion. In other words, the Government needed to find just 1.5 percent of waste to deliver their tax cuts. This is against a backdrop where Government spending is, in real terms, $18 billion dollars higher than it was 9 years ago.

    Cannot believe they did not hone in on waste. Absolutely pathetic.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. Viking2 (11,467 comments) says:

    Why would anyone take any notice of the very agencies that aaa rated subprime mortgages? A bloody great con job, almost bordering on blackmail. Who pays these bastards?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. Dave Mann (1,218 comments) says:

    Yeah yeah….. (yawn)…. Who are these godlike creatures anyway? If this S&P outfit is so shit hot, how come THEY aren’t running the world economy then? Eh…? Answer that one, gnomes of Zurich. And where does the apostrophe go? Who’s Poor what? Or are there lots of Poors and nobody can quite get the spelling right?

    Anyway NZ seems to be a bit on the poor side at the present, but thats pretty standard for non-productive debt-laden house-price-driven economies, so what is new? Nothing to see here…. move on.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. Glutaemus Maximus (2,207 comments) says:

    How dare that English chap save the Country $600m+ by putting forward a budget to stop us driving off a cliff!

    He promised the World. Bludgers of the World units, and strike for your rights!

    We need another Hikoi. Some of the bludgers won’t be able to turn up due to work commitments! Yeah Right.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. sonic (2,818 comments) says:

    It was “quick” as those good people at Standard and Poor’s got an advance copy. All hail our new overlords!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. Glutaemus Maximus (2,207 comments) says:

    Sonic is not only brain dead, but totally screwed up!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. Glutaemus Maximus (2,207 comments) says:

    Here is the best line yet from Goff!

    http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10575095

    What a weird man!

    Forgotten already about what the previous administration did!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. tknorriss (327 comments) says:

    Bevan “So with this change from negative to stable – does that mean our interest payments are less?”

    Given that we are competing for funds on the open market, and given that investors feel more comfortable investing in stable markets, I would say the answer to your question would be “yes”.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. jarbury (464 comments) says:

    Good to see the budget achieved its only purpose.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. tknorriss (327 comments) says:

    jadbury “Good to see the budget achieved its only purpose.”

    So, you are not impressed that our borrowing costs are a lot lower than what they would have otherwise been with a more reckless budget?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. jarbury (464 comments) says:

    I guess spending $600m on interest isn’t particularly helpful, and I’m not saying that it’s a bad thing our credit rating has been maintained. It just would have been nice to see a little more than that.

    Nothing for saving jobs is very disappointing.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. tknorriss (327 comments) says:

    jarbury “Nothing for saving jobs is very disappointing.”

    Well, I guess the fact that businesses won’t be facing as high lending costs as they otherwise might of has got to be positive for jobs; businesses will be able to employ staff instead of paying higher rates of interest. Also, you seem to have forgotten about the insulation fund which will definitely help out with jobs.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  17. rightofleftcentre (77 comments) says:

    Just reflect for a moment how different things would have been with Cullen and cronies expanding the bureaucracy to cope with the increased load of beneficiaries and taxing the rich pricks to pay for it all………

    And the budget was NOT written for Standard and Poors to give the thumbs up as a publicity stunt for Key/English. It was put together to try and minimise the effects of a global economy crash on our own economy. S&P simply passed judgement on what kind of job was done.

    And could someone please wipe the smarmy smug grin off Cunnliffes face (TV3 news) as he seemingly gloats over the difficulties we all face and the efforts being done to navigate us out of them. He’s clearly loving it.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  18. Kimble (4,438 comments) says:

    “Nothing for saving jobs is very disappointing.”

    tknorriss is right, lower debt repayments does more for jobs than a lot of the job “schemes” we have seen from government throughout history and around the world.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  19. mike12 (183 comments) says:

    Nice work JK & BE. Not only will my house be warmer but my mortgage won’t go up.

    Goff can spit all over his own members in the house all he like as he screams to be relevant but he’s just been double back slammed.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  20. Ratbiter (1,265 comments) says:

    Well I for one thank our new Standard & Poor’s overlords for smiling upon us with such good grace.

    (I know, I know, the $600 million per annum is what’s really important…)

    Was the possibility of bribing the Standard & Poor’s bigwigs considered and costed out?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  21. aardvark (417 comments) says:

    And what would be wrong with an S&P downgrade?

    As an exporter, I see the size of my earnings dwindling daily as the NZ dollar rises in value against the greenback.

    I’m sure all exporters are watching the same thing.

    What is the total value of NZ’s exports?

    If we’d been downgraded, and as a result the Kiwi dollar fell (by as much as 5c against the greenback) that increase in export-revenue would have more than made up for the increased cost of borrowing and the whole nation would have been better off as a result.

    So, perhaps the government *should* have been braver and said “stuff S&P” — after all, does the S&P rating even mean anything these days. Just look at how many A+ lending institutions went to the wall or got their fingers really burned through bad investment choices over the past 12-18 months — despite those “ratings”. It’s clear that the S&P credit rating is a rather devalued mechanism within the financial world in light of its obvious failures to adequately identify risk.

    And let’s face it, we’ve had several parties telling us endlessly that if we want to encourage growth and prosperity for all then we need to *CUT* the excessive taxes that Labour imposed on us.

    So, maybe the best thing the Nats could have done is to continue with their planned tax-cuts, put more money in people’s pockets, and *enjoy* the benefits of a lower NZ dollar.

    But, unfortunately, once again, the government of the day has wimped out and yielded to the pressure of a few money-merchants in Italian suits.

    Is it any wonder we’re still rattling around at the bottom of the OECD?

    Where’s guts, bravery and *vision* when you most need it?

    Well it ain’t in the halls of our parliament, that’s for sure!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  22. jarbury (464 comments) says:

    Excellent points aardvark. This may be a reasonably sensible budget but it’s certainly pretty visionless.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  23. getstaffed (9,186 comments) says:

    aardvark – get used to a higher kiwi against the AUD, USD, EUR and GBP. When the global recession begins to ease inflation in US, Europe and OZ will climb away (remember, they printed loads of currency) and their currencies will devalue further.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  24. chrisw76 (85 comments) says:

    Ok, the ratings agencies don’t have a great reputation at the moment, but you need to stop and think about why that is. The real problem was, was that they started putting ratings on CDOs and CDSs, etc which nobody understood the risks of properly. There was also the matter of investors using the rating as a shortcut for due diligence and not reading the explanatory text which explained that the rating was applicable to and relative to assets of a similar type.

    When it comes to things like sovereign debt though, their rating methodologies are sensible and this is why the global markets take notice. Sure we could ignore them, but this isn’t a great time to be borrowing money internationally and to do it under the cloud of a ratings downgrade would be the equivalent of introducing a new tax. For example, a ratings downgrade could have forced up floating rates by 0.5%. On a $200k mortgage this would be around $20 a week or about 2% of the average wage.

    Cheers, Chris W.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  25. Glutaemus Maximus (2,207 comments) says:

    This has been a tour de force!

    Actually Sonic may find this hard to understand. helps if you go to the right University.

    Go on sonic, where did you get so smart?

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  26. Glutaemus Maximus (2,207 comments) says:

    No answer was the reply!

    Come on Sonic, show us what you are made of, and don’t slip on it!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  27. RainbowGlobalWarming (288 comments) says:

    Jesus H Krist Jarbury,

    You really are a knobjockey. Whats so visionless about reducing long term debt servicing costs and saving jobs by saving the competitiveness of the economy? Oh, you wanted to see a few handouts? A vision of expanding New Zealands role on Foreign Affairs to mirror that of the UN development agency? A tunnel under Mt Albert that was delayed so long because even Helen knew it would never get B/C approval? A cross town mono-rail running between Pt Chev and Howick?

    All the best
    Rainbow

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  28. expat (4,050 comments) says:

    Rainbow you dick, the nats should have scrapped benefits and super schemes.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  29. voice of reason (490 comments) says:

    Well clearly someone disagrees with S&P when ANZ, National, SBSl raise their 3, 4 & 5 year lending rates by around 35points in the last few days

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  30. s.russell (1,640 comments) says:

    No, the lift in long term rates by the banks reflects their confidence that the economy will recover strongly, leading to the Reserve Bank tightening up monetary policy and lifting interest rates. So actually, it means they agree with S&P that the Govt has acted wisely.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote