Outlook On New Zealand Revised To Stable, Ratings Affirmed, On Sound Budget

Melbourne, May 28, 2009—Standard & Poor’s Ratings Services said today that it has revised the outlook on the ratings for New Zealand, and affirmed the ratings at ‘AA+/A-1+’. The ratings action reflects the sound outlook for the sovereign’s fiscal position, as articulated in the government’s budget, released today

“The change in the outlook on the foreign currency rating reflects our view that the measures announced in today's budget will support stabilization in the government's fiscal position over the medium term,” said credit analyst Kyran Curry, of Standard &Poor’s Sovereign Ratings team.

The government is forecasting fiscal deficits on an accrual basis of 4.4% of GDP in the fiscal year ending June 30, 2010, 5.1% of GDP in 2011, and 5% of GDP in 2012 due to a cyclical weakening in revenue and counter-cyclical stimulus measures. These are offset against the deferral of personal income-tax cuts and savings measures associated with public sector reforms and service delivery. The government estimates that additional debt required to fund the deficits to be 38.7% of GDP by 2013.

“The successful delivery of this strategy -- returning the operating position to surpluses over the cycle and maintaining low debt -- is consistent with maintaining the 'AA+' foreign currency rating on New Zealand,” continued Mr. Curry. “The main risk to the ratings would be a significant weakening in the credit quality of New Zealand's banking sector, which is largely owned by the Australian banks; however, we continue to expect the banks' capitalization to remain adequately able to absorb the likely increase in credit losses given the weak economic environment and, funding and capital support from the parent banks, if required. Standard & Poor’s considers that the major banks in New Zealand are core subsidiaries of their Australian parents.”

Standard & Poor's today also affirmed its 'AA+/A-1+' foreign currency ratings, but revised the outlook on the long-term ratings to stable from negative, on the following government-related entities: Housing New Zealand Corp., Housing New Zealand Ltd., New Plymouth District Council, Counties Manukau District Health Board, Auckland District Health Board, and Christchurch City Council and its wholly owned subsidiary Christchurch City Holdings Ltd. The AAA/Stable/A-1+ local currency ratings on these entities were unchanged.

About Standard & Poor’s
Standard & Poor’s, a subsidiary of The McGraw-Hill Companies (NYSE:MHP), is the world’s foremost provider of independent credit ratings, indices, risk evaluation, investment research and data. With offices in 23 countries and markets, Standard & Poor’s is an essential part of the world’s financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com.au

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