One of the big three global ratings agencies, Fitch, has revised up the country’s outlook.
The country’s foreign currency rating has been held at AA, but the outlook raised to positive from stable. The local currency rating has been held at AA+ with a stable outlook.
It said the upgrade in outlook reflected the country’s sound fiscal management and low level of government debt.
“[It] enhances the country’s resilience to economic and financial shocks, particularly given its exposure to external developments. External vulnerabilities from a high net external debt/GDP ratio remain a credit weakness, but the ratio has narrowed considerably from its 2009 peak,” Fitch said in its report.
The agency said there was “prudent fiscal management” across the political spectrum, which has resulted in low levels of debt that it expected to keep falling.
It said the government’s revised debt target range of 15-25 percent of gross domestic product – which comes into effect next year – allows for more flexibility, but would still keep debt at manageable levels.
However, it also noted risks from New Zealand’s dependence on commodities and export reliance on the Chinese market, which made the country vulnerable to any sharp slowdown in China’s economy.
It also noted the high level of household debt, which would pose a risk if interest rates or unemployment were to rise.
This article was originally published on RNZ and re-published with permission.