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Moody's likes fiscal discipline in NZ

NZN 1/07/2016

Moody's says regardless of the party in power, the New Zealand government will maintain a policy of low debt and fiscal discipline.

The credit rating company's semi-annual update report says New Zealand has a "low susceptibility to event risk".

The comment comes after the UK's decision to exit the European Union caused turmoil in financial markets.

The New Zealand government's accounts deteriorated after earthquakes struck the country in 2010 and 2011.

Moody's says the government is now in its third term of office and "has indicated its intention to return debt to a prudent level".

Gross total crown debt has peaked at well below 40 per cent of GDP before beginning to decline.

"We believe that the debt trajectory and the policy to deal with shocks remain compatible with a Aaa rating."

"New Zealand's flexible and market-oriented economic policies have supported economic performance that has become stronger and less subject to external shocks," Moody's says.

"Although per capita income is at the low end of the Aaa range, it is nonetheless high by global standards."

The main credit challenges facing New Zealand include that it has a resource-based economy, remains exposed to volatile export earnings, and has one of the largest net external liability positions of advanced economies, Moody's says.

Moody's says New Zealand has a strong banking system that is mainly foreign owned, lessening the government's contingent liability.

The rating outlook is stable.

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