Posts Tagged ‘credit agencies’

If National are such prudent fiscal managers…

… why is it that Standard & Poors, Moodies, and Fitch constantly downgrade our sovereign credit rating whenever they are in power?



Source: NZ Debt Management Office


Just wondering.

This blogpost was first published on The Daily Blog on 31 December 2013.



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John Key’s foot-in-mouth syndrome

16 October 2011 3 comments



In Parliament last week (4 October), John Key quoted a mysterious, anonymous, “email” which he daid  “inferred”  that, “when Standard and Poor’s was giving a meeting in New Zealand about a month ago, what it did say was that there was about a 30 percent chance that we would be downgraded. That is what happens when one is on a negative outlook. It did go on to say, though, that if there was a change of Government, that downgrade would be much more likely.”

However, a quick glance at the official government website, the NZ Debt Management Office not only doesn’t support that claim – but actually shows the reverse: Labour  actually RATES BETTER than National/Rogernomics governments.


[Click on image for full size version]



Note that three credit downgrades happened duting three National governments; 1991, 1998, and this year. And if you include the Rogernomics period – that makes FOUR neo-liberal governments that were downgraded.

Do credit ratings agencies  seem “risk averse” to new right governments? Do they prefer centre-left governments?

First, look at 10 September 1998 (National government) – AA+ (negative outlook)

But when Labour came to power – 7 March 2001 – AA+ (stable outlook)

Stable outlook?!

Nah, must be a mistake. Let’s have another look at a following period…

6 August 2008  (Labour Government) – AA+ (stable outlook) re-affirmed


Well, bugger me! It  rather does seem that credit agencies look favourably upon  centre-left government policies rather than centre-right administrations.

Whoda thunk?!

John Key – wrong again. It’s rather getting to be a habit with the ‘infallible’ Dear Leader.



Reference Sources

Hansards – 1. Credit Rating Downgrade—Effect on New Zealand Economy

NZDMO – New Zealand Sovereign Credit Ratings



It’s official – National is a poor manager of the Economy.

4 October 2011 2 comments

It’s official – National (and Labour under Rogernomics) was, and remains,  a poor manager of the economy. Treasury and international credit agencies back this up with their data.

Firstly, Treasury data of recent New Zealand history reaching back to Rob Muldoon’s administration show that credit agencies inevitably downgrade our sovereign credit rating whenever National is in office. The only exception to this is when Labour was in power – during it’s Rogernomics era.




New Zealand’s sovereign credit rating is important because it affects the interest rate at which we borrow money from overseas. The lower the credit rating, the higher the interest we pay as we pose a higher degree of risk to lenders. (Although,  as has been pointed out by one commentator on Radio NZ, New Zealand has never defaulted on a loan repayment yet.)

The money that government borrows (sovereign debt) or that bank’s borrow (private sector debt) is all taken into consideration by overseas lenders.

It is worth noting the critical importance that governments place on sovereign credit ratings. Two years ago, John Key and Bill  English reminded us as to the significance of New Zealand’s credit rating,

Our primary focus for this Budget is to avoid a credit rating downgrade because we think that would add about 1.5% to mortgages for New Zealand homeowners.” – John Key,  May 2009. Source.

If a downgrade were to happen, it would add 1-2% of interest on the amount the government borrows, which is around $600 million each year. This is to be avoided at all costs.That’s every homeowner, every business, everybody paying 2% more. That would be irresponsible in my view for the government not to act. ”  – John Key,  May 2009. Source.

The No. 1 way to see New Zealanders down the road from their jobs is if their businesses cannot be funded. That is what happens when we have a credit downgrade, and that is what we would have had under a Labour Government.”  – John Key, June 2009. Source.

And as early as March this year, Finance Minister Bill English said,

There is no doubt that a credit downgrade would generally lead to somewhat higher interest rates.” – Bill English, March 2011. Source.

When a credit downgrade was averted in 2009, John Key was very quick to take the credit,

If I just look at our debt track and I compare that to the OECD debt track for other countries for 2012/2013 year, we have got a substantially lower debt exposure than most other countries.” – John Key, May 2009. Source.

Yet, on Radio NZ today he stated,




Note the Prime Ministers comments,

“”With the greatest respect, I’m not responsible for what happens in Europe and the United States, nor technically was I in government when there was the enormous build-up in private sector debt.”

Instead, Mr Key says an increase in private sector debt when Labour was government has helped contribute to the downgrade. ” – John Key, 4 October 2011.

So in 2009 we “have got a substantially lower debt exposure than most other countries” – but only two years later we have “an increase in private sector debt when Labour was government “.

It seems that Mr Key is confused about our debt levels?

As for refusing to take responsibility for our credit down-grade – we might overlook that once. But how many times has New Zealand been downgraded when National was in office?


New Zealand's foreign currency credit rating history - National's track record in downgrades.


Standard & Poors have downgraded New Zealand’s credit rating three times during National governments; 1991, 1998, and this year.

Moody’s downgraded NZ in 1998 (National government).

Fitch, once, five days ago.

As an aside, both Moody’s and Standard & Poors downgraded NZ  during the neo-liberal reforms of Roger Douglas, in the mid-late 1980s.

It seems that credit agencies view neo-liberal economic policies as risky.

By contrast, Labour’s tenure of government was positively rated or upgraded by the three agencies.

All this makes a mockery of  National’s claims as being a “prudent fiscal manager” of the country’s economy. They are nothing of the sort. The verdict of credit agencies is clear: National is a poor manager of the economy.

This, of course, many of us new already.

There is a high degree of irony in this whole affair. National clearly refuses to accept any degree of responsibility for New Zealand’s credit downgrade. Yet, they are the government. They are the ones in charge. They pass laws and make policies that affect every single New Zealander.

Refusing to accept responsibility is poor form. Especially when, on February 17th, John Key made this observation about welfare recipients,

“”But it is also true that anyone on a benefit actually has a lifestyle choice. If one budgets properly, one can pay one’s bills.

“And that is true because the bulk of New Zealanders on a benefit do actually pay for food, their rent and other things. Now some make poor choices and they don’t have money left.“” Source

So welfare recipients are expected to be responsible for their actions.

But National Governments are not.

Is that how things work in John Key Land?




Additional Reading

Reserve Bank – Household Debt

Treasury – Private-sector debt and factors affecting it

Moody’s credit rating definitions

Standard & Poors definitions