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Minister of Finance Bill English was looking at the positives of last month's Budget of tax cuts, infrastructure spending and the population having curtailed some spending and begun debt reduction, but he painted a sobering picture of escalating debt for New Zealand.
He was in Dunedin yesterday to brief more than 50 Otago Chamber of Commerce members on on postBudget issues.
"Building the recovery" was part of a series of updates he is delivering around the country.
Mr English outlined the economics of the recession in debt terms, noting non-tradeable (domestic spending) had risen 15% while the tradeable sector (international earnings from the rest of the world) had shrunk 10%: "We're spending more than we're earning, which was made worse by the past [property-fuelled] decade," Mr English said.
The Government remained borrowing $240 million per-week, and would do so for each week of the next three years, Mr English warned.
"Any drop in credit rating would be a credibility hit. It just raises the cost of capital," he said.
The "biggest issue" for the Government was that while it was paying 6% for 10-year bonds, the United States was paying 2.5% for the same bonds, he said.
"We're not in that [downgrade] zone, except for external [Government] debt.
But because of the mood of lenders we're trying to turn it around," Mr English said, having in "recent weeks", held meetings with credit agency officials.
He said stopping contributions to the SuperFund and "abandoning half the tax package" had "kept us from a rating downgrade".
On the Standard & Poor's sovereign credit ratings, New Zealand's foreign currency borrowing rating has fluctuated between the highest AAA rating to AA-/Aa3 during the past three decades, and is presently at AA+ with a stable outlook.
Ratings in the AA range are seen as "a very high level of credit-worthiness", S&P says.
The stable outlook was reaffirmed in May last year by S&P, following a January negative outlook announcement earlier that year.
Aside from paying the escalating interest costs of foreign debt, Mr English said the "main concern" was the Government's vulnerability to downgrades by agencies, such as S&P, Fitch and Moody's which all rank New Zealand.
They were the agencies that rated Greece and Spain, both in an economic spin, overburdened with sovereign debt issues which are undermining international markets and commodities.
"Some governments' are in better shape [as borrowers] than others," he said.
After past recessions, New Zealand had growth rates of 6%-7%, but the forecast was 3%.
New Zealand was fortunate to be "hitched to the China-Australia economic train", but he cautioned of "headwinds" developing in a Chinese property bubble and the need for US and United Kingdom consumers to return to paying a premium for New Zealand products.