\u201cThe outlook revision reflects our view that a substantial debt reduction is becoming more difficult to envisage, as fiscal consolidation has been delayed in the past few years,\u201d Fitch wrote.<\/p>\n
The conflict in the Middle East has sent shockwaves around the world, pushing up the price of fuel and constraining supply. Photo \/ Getty<\/p>\n
Reacting to Moody\u2019s outlook downgrade, Olsen told Ryan Bridge TODAY that New Zealand was \u201cclearly on notice\u201d.<\/p>\n
\u201cWe\u2019ve had higher inflation in recent times, we\u2019ve of course got expectations that interest rates might have to increase, and the Government\u2019s finances are unlikely to look better after the Iran war that we\u2019re currently seeing. And so Moody\u2019s have looked at all of that and said, well, all of those conditions make it quite difficult for the Government to remain on track to pay down debt, to get things back to surplus,\u201d Olsen said.<\/p>\n
\u201cThey\u2019ve already seen a couple of years where that sort of debt repayment and surplus return have been pushed out and pushed out and pushed out, and they\u2019re going, surely if you\u2019ve continued to push them out and now got another shock, it can\u2019t look good,\u201d Olsen said. <\/p>\n
\u201cSo risks [are] there around just how long we\u2019re taking to return to surplus, but some very difficult conversations for the government. They\u2019ll be looking at these sort of international ratings agencies and certainly not feeling comfortable, but equally there\u2019s not a lot of easy options out of this sort of mix.\u201d<\/p>\n
Olsen was not sure whether Moody\u2019s had made similar assessments of other countries yet.<\/p>\n
\u201cIf everyone else gets downgraded around you, then you might be paying a bit more, but so is everyone. That\u2019ll just be part of the global economic cycle. If New Zealand is being singled out a bit more in terms of how long it\u2019s taking us to repay debt and everything else, that\u2019s where you start to get worried that … our financial positioning, how we\u2019re regarded internationally, is falling back. And I think that\u2019s why it was interesting in this Moody\u2019s release, they said quite clearly, look, institutions in New Zealand are still good, they\u2019re still solid. We\u2019re just worried about how long things are sort of pushing out.\u201c<\/p>\n
Finance Minister Nicola Willis said Moody\u2019s were clear that improving New Zealand’s rating requires disciplined spending. Photo \/ Mark Mitchell<\/p>\n
Olsen was of the view that in next month\u2019s Budget, the Government could push out the country\u2019s return to surplus again.<\/p>\n
\u201cThe Budget\u2019s not going to look great given that the Government\u2019s having to pay a whole lot more for fuel and just doesn\u2019t have as much economic activity coming in. But again, that would be now, I think, the fourth year that you might see a push out. So for the ratings agencies, they\u2019ve put us on notice, they\u2019re not just going to keep watching as this happens. I wouldn\u2019t be surprised within the next year if there\u2019s not a larger sort of focus on fiscal consolidation that they might well sort of threaten to pull that trigger even harder.\u201c<\/p>\n
Treasury, in its half-yearly update last December said it saw New Zealand\u2019s deficit deepening further, from $14 billion in the year to June 2025 to $16.9b in 2025\/26, before narrowing to $60 million in 2029\/30.<\/p>\n
While that was an improvement from when Treasury last published forecasts at the May 2025 Budget, it still undershot National\u2019s pre-election pledge to return the books to surplus by 2026\/27.<\/p>\n
Willis responds to Moody\u2019s move<\/p>\n
Responding to the outlook downgrade, Willis said it was \u201canother warning that we can\u2019t afford to simply spend more and borrow more, or we risk higher interest rates, higher borrowing costs and more pressure on Kiwi families\u201d. <\/p>\n
Willis said New Zealand keeping its Aaa rating recognised the \u201cresilient nature of our economy and strong commitment to fiscal discipline\u201d.<\/p>\n
\u201cMoody\u2019s are clear that improving our rating requires disciplined spending, a clear path to balanced books and reducing debt.\u201c<\/p>\n
\u201cMoody\u2019s warns that if deficits remain and debt keeps rising, our outlook will worsen – increasing the costs of servicing the debt, squeezing businesses and leaving less funding for the public services New Zealanders rely on.<\/p>\n
\u201cDebt servicing is now the fourth-largest cost to taxpayers, exceeding the combined costs of the police and defence forces, corrections, customs and the justice system. With global interest rates rising, we must keep our books in order to ensure New Zealand remains strong in a more unstable world.<\/p>\n
\u201cThe revision also confirms the need for any support delivered in response to the Middle East conflict to be temporary and targeted. If we were to start clocking up the credit card like the previous government, every New Zealander would pay the price \u2013 with more of every taxpayer dollar going on interest, instead of hospitals, schools and roads.\u201c<\/p>\n","protected":false},"excerpt":{"rendered":"\u201cThe outlook revision reflects our view that a substantial debt reduction is becoming more difficult to envisage, as…\n","protected":false},"author":2,"featured_media":382268,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[74,3041,138,144085,1887,116990,63556,3914,219,1644,1019,89778,3403,117,111,139,11552,69,17695,68689,312,8466,61,80,2963],"class_list":{"0":"post-392628","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-economy","8":"tag-after","9":"tag-agency","10":"tag-business","11":"tag-clearly","12":"tag-countrys","13":"tag-downgraded","14":"tag-downgrades","15":"tag-economist","16":"tag-economy","17":"tag-financial","18":"tag-international","19":"tag-moodys","20":"tag-negative","21":"tag-new","22":"tag-new-zealand","23":"tag-newzealand","24":"tag-notice","25":"tag-nz","26":"tag-outlook","27":"tag-rating","28":"tag-says","29":"tag-second","30":"tag-to","31":"tag-zealand","32":"tag-zealands"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/392628","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/comments?post=392628"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/posts\/392628\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media\/382268"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/media?parent=392628"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/categories?post=392628"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/nz\/wp-json\/wp\/v2\/tags?post=392628"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}