New Zealand is failing to 'cut the economic mustard', as oulook downgraded

The country has been put under a financial “negative watch” by Moody's, an international rating agency.

It’s essentially a warning that New Zealand’s credit rating could be downgraded if the economy continues in its current trajectory. It’s currently at the top tier AAA, meaning the nation has a high creditworthiness with minimal risk of default.

Finance Minister Nicola Willis said Moody’s outlook reinforces that the Government’s response to the current fuel crisis is the right one.

“Global economic and geopolitical uncertainty and inflation pressures including fuel price increases, have contributed to the revision,” she said.

“While these are outside our control, Moody’s are clear that improving our rating requires disciplined spending, a clear path to balanced books and reducing debt.”

Infometrics Chief Economist told rova that he was inclined to agree. 

“The challenge we’ve got at the moment is that New Zealand’s facing a pretty challenging set of economic circumstances.”

“Inflation is set to be higher, economic growth is set to be weaker, and all of that persistence makes the government’s job so much harder when it comes to Budget setting.”

Olsen expects major changes are needed in the coming Budget to not only prolong the current retention, but to spearhead New Zealand forward and off the ratings backbench.

“The government will be focused on trying to maintain some fiscal discipline, limiting how much additional spending is put into the economy, trying to eventually steer things back to a return to surplus,” he explained.

He projected that some benefit services might be on the chopping block, or some taxes could be hiked.

All will become clear when Nicola Willis delivers the Budget on May 28th, 2026.

Brad Olsen image supplied.