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Downgrade of outlook a puzzle -- English

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Fuseworks Media
Fuseworks Media

By NZPA political staff

Wellington, Nov 23 NZPA - The downgrading of New Zealand's outlook by ratings agency Standard and Poors is puzzling, Finance Minister Bill English says.

The international credit rating agency, Standard and Poor's, yesterday revised New Zealand's outlook from stable to negative.

Prime Minister John Key yesterday said the shift appeared to be about a stronger focus on countries with high levels of overall indebtedness.

Labour leader Phil Goff said it was a result of failing to address savings and undermining efforts put in place by the previous Government.

Mr English said New Zealand was actually in a better position than 12 months ago when the outlook rating was lifted.

If Standard and Poors had concerns about New Zealand's position, they should have raised them in their meeting with him three weeks ago, Mr English said.

"If they've got concerns they should raise it with us, we keep very open communication with the ratings agencies.

"I think we're making more progress than they do."

Mr English said the Government was focused on reducing external debt and increasing savings.

"I think what's happened is because of the Irish bailout -- the financial markets where we borrow billions of dollars a year are more sensitive to how much debt countries have and New Zealand has one of the highest rates of external debt in the developed world."

New Zealand's external debt, from households, business and government, was $170 billion, up from $90 billion in 2000 and forecast to nudge above $200 billion in the next few years. Much of that was private debt.

Mr English said the international debt market would become tougher in the next few years as Britain, the United States and other large countries looked to borrow hundreds of billions of dollars.

"It'd be better if we had less need for overseas debt, and this is a bit of a warning that over the next few years it could get a bit tougher."

The Government knew what it had to do to improve New Zealand's position and was focused on doing that rather than arguing with ratings agencies, Mr English said.

"These statements would have made sense, I think, 12 months ago (but) they don't make quite as much sense now. But we're not going to get distracted by that because what's important is what's actually happening in the economy rather than what some commentators saying about it."

The Savings Working Group would make suggestions about how New Zealand could improve its savings and people were already adjusting and saving more.

Time would tell if that was a long-term change, Mr English said.

He believed the impact of the downgraded outlook on the economy would be minimal.

Mr Goff said the Government's cut backs to KiwiSaver and freeze on payments to the Cullen Fund (superannuation) had an impact and it had no plan for an economic recovery.

"It has no plan and that's reflected in that credit downgrade," he said.

"The very first thing this Government did was to cut KiwiSaver and to cut the Cullen Fund, and what the credit agency has said is that this country is not saving enough."

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