Moody’s: New Zealand government finances are improving

Economic growth is accelerating, partly due to earthquake reconstruction, with real GDP expected to increase by 3% in 2014, while the government budget is forecast to be in a balanced position in the 2014-15 fiscal year and in surplus thereafter
In terms of challenges to the country’s creditworthiness, these include a continuing reliance on foreign savings to finance relatively large current account deficits, which have been evident for the past four decades
As a result, New Zealand’s major vulnerability — despite the absence of any problems in accessing the global capital markets — is its dependence on foreign capital inflows, and its negative net international investment position is the largest of any Aaa-rated country.
However, Moody’s notes that a large portion of these liabilities belong to the subsidiaries of Australian banks and, given the strength of the parents, these are unlikely to represent a significant risk to the sovereign.

On the prospects for the budget:

the government posted deficits of 5% of GDP in 2010 and 2011 as a consequence of the economic effects of the global financial crisis and the Canterbury earthquakes
These deficits came after several years of fiscal surpluses, which reflected the prudent fiscal stance of New Zealand governments
This commitment to countercyclical policy is likely to allow the government to achieve its target of balancing the budget over the next few years

– Banking sector risk is assessed as Low (-), and New Zealand’s banking system is one the highest rated by Moody’s