Standard & Poor's has made no change to New Zealand's credit rating and says the Government must achieve its fiscal targets for its external position to improve.
Last November the credit rating company placed the outlook for New Zealand's AA-plus rating on a negative outlook.
Today it said that the contents of the Government's 2012 budget were "consistent with the assumptions that feed into our sovereign ratings on New Zealand".
New Zealand had fiscal and monetary policy flexibility, strong institutions, economic resilience and actively traded currency but its credit quality was weakened by its high external liabilities, despite some de-leveraging in recent years.
"The negative outlook on the New Zealand foreign currency rating reflects the possibility of a downgrade if New Zealand's external position does not improve," sovereign analyst Kyran Curry said.
"Achieving the Government's stated fiscal targets will be an important component of such an improvement.
Public finances may need to be adjusted faster if New Zealand's real cross-border interbank funding costs rise. On the other hand, the ratings could stabilise at the current levels upon a sharper-than-expected improvement in the external accounts, led by stronger export performance and higher public savings."
The budget has the Government's operating position in surplus in 2014-2015, a year earlier than expected.
Finance Minister Bill English said the budget warranted rating agencies looking favourable on New Zealand's rating.
