Interest rates are likely to rise following two credit-rating agencies yesterday downgrading New Zealand's economy.
The downgrade will bring bad news for New Zealanders struggling with mortgages, credit-card debt or hire-purchase payments, but provide some hope for savers that they will receive higher interest rates for their bank deposits.
Bank reform to curb lending to already over-extended borrowers is also a possibility as the Government seeks to rein in household debt and encourage savings.
The early market reaction to the downgrades saw the dollar fall against both the United States and Australian currencies, bringing some relief to exporters trying to increase their sales in prime overseas markets.
Interest-rate movements were muted but even without the Reserve Bank increasing its official cash rate from 2.5% before next year, predictions are that banks having to pay higher borrowing costs offshore will lift their lending rates.
Both Standard & Poor's and Fitch downgraded New Zealand's long-term foreign currency rating to AA with a stable outlook from AA+ with a negative outlook.
Moody's has retained its highest possible AAA rating with a stable outlook.
