Yesterday’s NZ Herald reported S&P’s decision to maintain NZ’s current AA+ credit rating. The detail is interesting though -
New Zealand’s current account deficit widened to about 9.7 per cent of GDP in the June year, from an already high 8 per cent in 2005. This compared with a median current account surplus of 2.9 per cent for those countries rated in the ‘AA’ category.New Zealand’s net foreign debt is expected to be about 190 per cent of current account receipts, compared with the median of 26 per cent for similarly rated countries.
…Mr Curry said the stable outlook also took account of S&P’s expectation the current account deficit would move lower as domestic demand continued to slow and growth is rebalanced in favour of an export-led recovery.
“If this outcome fails to eventuate, however, the ratings on New Zealand could come under pressure.” he said.
And in case you miss the point, “rebalancing growth in favor of an export-led recovery” means NZers will eventually wake up to the painful reality that they can’t afford all the stuff they’re buying and are going to have to start producing things for the foreigners they have unwittingly become indentured servants to.