NEW ZEALAND’S CREDIT RATING MAY BE CUT

January 13th, 2009

Privately, with friends and family, I’ve been referring to New Zealand as Iceland 2. The financial situation here is not quite as absurd as Iceland’s, but the comparison is legitimate because of New Zealand’s extremely high debt load.

—NEW ZEALAND FOREIGN DEBT SITUATION CRITICAL: “ADJUSTMENT” IMMINENT, WILL BE FORCED ON THE COUNTRY IF NECESSARY

If Germany is having trouble with its bond auctions, how is New Zealand going to manage?

With great difficulty, at best.

Via: Bloomberg:

New Zealand’s AA+ foreign-currency credit rating may be cut if the nation’s current account deficit and overseas debt begin to curb growth and investment, Standard & Poor’s said.

The rating company affirmed the rating, though revised the outlook to negative from stable, according to a statement today. The AAA local-currency rating is affirmed with a stable outlook.

New Zealand’s dollar fell to a four-week low after the statement, which adds to signs that investors may turn away from an economy that is in a prolonged recession. A report earlier today showed business confidence has slumped to a 34-year low and the government last month forecast widening budget deficits over the next five years.

“It’s not going to be easy for New Zealand,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “They have a massive current account deficit and a sizeable budget deficit. These are two things that aren’t good to have in an environment when it’s a struggle to raise capital.”

New Zealand’s dollar fell to 56.45 U.S. cents at 2:40 p.m. in Wellington from 57.17 cents immediately before the S&P report and from 57.93 cents in late Asian trading yesterday.

Posted in Collapse, Economy | Top Of Page

One Response to “NEW ZEALAND’S CREDIT RATING MAY BE CUT”

  1. tochigi says:
    January 15, 2009 at 3:20 am

    since Friday, the NZ$ has gone from 54 yen to 47.6 yen. Ouch. Could go into ANOTHER free fall.

    if crude oil came back up for whatever reason, to the $100+ range, petrol prices could get nasty very quickly. Now that almost no wheat is grown in NZ, thanks to the criminal dairy-destruction of the Canterbury Plains, what will the new price of bread be, i wonder? Iceland not so funny now. homegrown potatoes and silverbeat could be prominent on the menu for a while…

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