Moody’s Downgrades New Zealand’s Financial Outlook to Negative

Moody’s credit rating agency has downgraded New Zealand’s financial outlook to “negative” from “stable” while reaffirming the country’s top-tier AAA credit rating, citing global economic and political uncertainty as presenting downside risks to growth.

The agency noted that inflation pressures persist, including fuel price increases, stubborn non-tradeable housing costs and utility prices and higher electricity costs, even as it affirmed New Zealand’s AAA rating due to strong institutions and policy framework.

Weaker growth, tight monetary policy, and higher debt servicing costs are adding pressure to the fiscal outlook, with Moody’s also noting New Zealand’s delayed return to a budget surplus and that recent shocks have increased the country’s debt burden.

Inflation pressures also persist, including fuel price increases, stubborn non-tradeable housing costs and utility prices, and higher electricity costs.

Moody’s report

In March, Fitch Ratings similarly lowered New Zealand’s outlook to ‘negative’ from ‘stable’, citing increasing difficulty in reducing debt due to delayed fiscal consolidation.

Global economic and geopolitical uncertainty present downside risks to growth.

Moody’s report released on Wednesday

Moody’s affirmed that New Zealand’s top-tier Aaa rating remains supported by strong institutions and policy framework, even as it warned that further interest rate hikes are likely given inflation remains above the central bank’s target range.

New Zealand’s annual inflation rate was unchanged at 3.1 per cent in the first quarter, remaining above the central bank’s target range and increasing the likelihood of further interest rate hikes later in 2026.

Moody’s report

New Zealand’s return to a budget surplus had been pushed back by a year, while recent shocks had increased the debt burden and weakened debt affordability.

Moody’s report

RNZ Business Editor Corin Dann said downgrades to outlooks by credit rating agencies could be seen as a warning to countries that unless they start to address their underlying financial positions, they could face a full and potentially more damaging credit downgrade in the future.

Unless they started to address their underlying financial positions, they could face a full and potentially more damaging credit downgrade in future.

RNZ Business Editor Corin Dann

New Zealand last faced a full rating downgrade in 2011 after the global financial crisis.