Fitch was the first to issue a downgrade but, as speculation mounted over when S&P would make its move, sovereign credit analyst Kyran Curry issued a press release lowering the S&P rating to AA from AA+.
Both S&P and Fitch pointed to earthquake-related spending rising as part of their reasons for the credit downgrades.
The lowering of the foreign and local currency long-term ratings followed S&P's assessment of the likelihood that New Zealand's external position would deteriorate further, Mr Curry said.
The sound financial sector, economic resilience and public policy stability were moderated by New Zealand's high external imbalances, which were accompanied by high household and agricultural sector debt, dependence on commodity income and emerging fiscal pressure associated with its ageing population, he said.
Rising public savings would help in keeping the country's current account deficit in check. Ratings could improve if there were sustained current account surpluses, led by a stronger export performance, along with higher public savings and markedly reduced external debt.
Fitch said foreign debt was a "key vulnerability" as it lowered the rating one notch to AA. It raised the outlook to "stable" from "negative", where it had been since July 2009.
Labour Party finance spokesman David Cunliffe told the Otago Daily Times Fitch had made it clear its credit rating downgrade reflected the Government's failure to address structural problems of high private debt and the widening current account deficit.
"Finance Minister Bill English says there is nothing we can do and the Government will 'muddle through' when muddling through is not good enough.
"You can't fool the rating agencies by saying we will solve all our problems with a footy match."
Fitch clearly laid out the structural policy failure behind the downgrade, which included the high and growing current account deficit, high external debt and the structural imbalance between savings and investment, Mr Cunliffe said.
National had walked away from reports of its own Tax and Savings Working Groups, which issued dire warnings of the same structural problems. Previous rating agencies reports had also raised similar issues.
National had closed its eyes to structural issues and had given trickle-down tax cuts to the wealthy, he said.
"This has made the problem worse, not better, driving the Government's books deeper into debt and worsening the current account deficit as high-end tax cuts were spent on luxury imports."
The short-term response of state-owned asset sales did not solve those problems and had not reassured rating agencies, Mr Cunliffe said.
Craigs Investment Partners broker Peter McIntyre said the dollar had fallen against both the United States and Australian currencies on the news and bond yields rose.
"We think the downgrade had been partially anticipated by the market, explaining the New Zealand dollar's relatively weak performance over the past week.
"It's no surprise S&P have followed Fitch given that we do have too much debt. There is now a time for the introduction of some 'good old-fashioned financial values', but how that can happen is a minefield."
Mr McIntyre predicted banking regulation could be introduced to tighten up lending rules.
Westpac chief economist Dominick Stephens said, in theory, a lower credit rating would increase the cost of funds for the New Zealand economy and the New Zealand Government.
"Typically, you would expect to see higher government bond rates, further widening of corporate funding spreads, a lower dollar and lower short-term swap rates.
"Even apart from today's downgrade, we've flagged the possibility of rising borrowing costs independent of changes in the official cash rate as a result of heightened global financial market volatility."
That possibility reinforced the Westpac view the Reserve Bank remained "firmly" in a wait-and-see mode, Mr Stephens said.
Mr McIntyre said, while a rating downgrade was never something to aspire to, he did not see the development as a major negative factor for New Zealand.
Household debt levels were still high at 147% of disposable income but had been slowly falling since they peaked at 154% in early 2008.
"Our sovereign debt position is strong compared to much of Europe, the US and the United Kingdom.
"The key impact will be seen in currency markets and some weakness in the New Zealand dollar will be welcomed by many," Mr McIntyre said.
Finance Minister Bill English said New Zealand was not immune to the global backdrop. In particular, investors were now reassessing their appetite for debt and credit rating agencies were taking a tough stance.
