S&P Global ratings upgrade a massive boost to Grant Robertson and Labour's economic management credentials

Prime Minister Jacinda Ardern announces Auckland will rejoin the rest of the country at alert level 1 at midnight on Monday, February 22.

Global credit ratings agency S&P Global has given New Zealand the first ratings upgrade of any country since the global coronavirus pandemic, effectively giving the Government a cheaper credit card and sending a signal to global investors New Zealand is on a positive economic trajectory.

In a major coup for Labour – and Finance Minister Grant Robertson’s – international economic management credentials, the credit agency raised the ratings of New Zealand’s foreign and local currency government debt by a notch to ‘AA+’ and ‘AAA’, respectively, from ‘AA’ and ‘AA+’.

The upgrade will continue to ensure that the cost of financing New Zealand’s ballooning national debt is kept under control and the ability of the Government to borrow to finance Covid-induced deficits continues as cheap rates.

Both ratings come with a stable outlook attached, making them the best ratings New Zealand has had from S&P for almost 12 years, when it last had the same marks.

Jacinda Ardern and Deputy PM Grant Robertson converse in the House.
Jacinda Ardern and Deputy PM Grant Robertson converse in the House.

* S&P raises NZ's credit ratings, sees property prices moving higher
* Govt debt levels position NZ well for Covid-19 recovery, ratings agency says
* Improved S&P outlook 'underlines' position of NZ economy, says Grant Robertson

“The real thing for me is that this is the first upgrade that Standard And Poors have done since the pandemic, so I think that’s a real sign of confidence in our recovery and our rebuild,” Finance Minister Grant Robertson told Stuff from Dunedin late yesterday.

“The other thing that is important is the general confidence that that will flow through to; not only for New Zealand businesses, but also for international businesses, people looking to invest. They take notice of these ratings they take notice of the commentary, and so that’s got to be good for us as well.”

Higher sovereign credit ratings typically make it easier for governments to borrow more money at a lower interest rate as well as boosting economic confidence more generally.

It also marks New Zealand as a stand-out economic performer in a post-Covid world. Rival rating agency Fitch also affirmed Australia’s AAA credit rating yesterday, but S&P is yet to deliver a new verdict on Australia’s economic outlook.

“New Zealand's stable institutional and governance settings are key credit factors underpinning the sovereign rating. Proactive policymaking supports sustainable public finances and economic growth,” the accompanying commentary to the new rating said.

The ratings' agency also said that while it was keeping an eye on debt, it wasn’t concerned provided the Government's forecast budget deficit reductions occur.

“New Zealand's debt profiles compare well to those of its similarly rated peers and support its credit rating, even though its debt levels are higher than in the past,” the report said.

“I'm very pleased with not only the ratings upgrade but also the commentary as well,” Robertson told Stuff.

“Mostly because it means that from a New Zealand perspective there's confidence out there in the world about the economy, hopefully it keeps supporting the low cost of borrowing for us.”

Yet Robertson was still cautious that the improved ratings did not mean the Government could let go of the fiscal reins or get complacent.

“It pays not to get too carried away – my Scottish Presbyterianism will never let that happen anyway – but look we've borrowed very large sums of money because we did want to support New Zealand businesses and households to get through.

“I never shy away from that, but we have to keep an eye on the balance of the economy at the same time.”

S&P also said that, on its estimation, external economic shocks and even a shock to the frothy housing market could be managed.

“We now believe that the Government's credit metrics can withstand potential damage from negative shocks to the economy, including a possible weakening of the real estate market, and its fiscal position at the 'AA+' rating level,” it said.

“New Zealand's monetary flexibility, wealthy economy, and institutions are conducive to swift and decisive policy actions and offset the country's external imbalances.”