With the long-promised return to surplus potentially pushed out a fourth year, the international ratings agencies\u2019 patience is wearing thin, writes Catherine McGregor in today\u2019s excerpt from The Bulletin.<\/p>\n
To receive The Bulletin in full each weekday,\u00a0sign up here<\/a>.<\/p>\n On notice<\/p>\n New Zealand is \u201cclearly on notice\u201d, Infometrics\u2019 Brad Olsen said on Thursday, hours after ratings agency Moody\u2019s shifted the country\u2019s credit outlook from stable to negative \u2013 the second major agency to do so, after Fitch in March. As\u00a0the NZ Herald reports<\/a>, Moody\u2019s affirmed the country\u2019s AAA rating but said rising debt, persistent inflation and an Iran-war shock made a reduction in fiscal deficits harder to envisage. Government debt is tipped to hit 53.9% of GDP by June. Olsen said a return to surplus \u2013 already pushed out repeatedly \u2013 could be delayed a fourth year, and warned that \u201cif there\u2019s not a larger sort of focus on fiscal consolidation [the agencies] might well sort of threaten to pull that trigger even harder\u201d.<\/p>\n Hours after the Moody\u2019s announcement, finance minister Nicola Willis held a media briefing to unveil three oil-shock scenarios modelled by Treasury, which made the \u201cvery unusual\u201d decision to reopen its pre-budget forecasts in the wake of the fuel crisis.\u00a0As BusinessDesk\u2019s Thomas Manch reports<\/a>\u00a0(paywalled), with Brent crude easing to US$102, Willis said the mildest scenario \u2013 inflation reaching 3.9% and growth slowing to 2% \u2013 now looked most likely. The worst case, which would require oil prices rocketing to US$180, would spike inflation to 7.4% and push unemployment to 6.6%. NZ\u2019s recovery was \u201cdelayed, but not derailed\u201d, she said.<\/p>\n The productivity problem<\/p>\n Also released on Thursday, new Stats NZ data showed multi-factor productivity fell 0.9% in the year to March 2025.\u00a0As the NZ Herald\u2019s Liam Dann reports<\/a>\u00a0(paywalled), labour productivity technically rose, but only because firms cut workers faster than production fell. Capital productivity declined too \u2013 meaning more money went into the economy while total output still dropped 1.5%.<\/p>\n The long-run picture is no more comforting. The data confirms a downward trend stretching back well before Covid: in the year to March 2023, multi-factor productivity fell 2.2%. Since 1996, NZ\u2019s goods-producing industries have improved output per hour by just 16.6%, against 72% in the primary sector. Economists point to some consistent culprits: the country\u2019s preference for housing investment over productive capital, weak R&D spending, and poor regulatory settings.<\/p>\n $4 billion out the door<\/p>\n