• This week the focus is on the Budget, with the potential for a sovereign credit rating downgrade imposing a degree of fiscal discipline.  To reduce the chance of a downgrade the Government will be highly focused on constraining expenditure growth and mitigating revenue impacts.
• Ireland has demonstrated the importance of avoiding a sovereign downgrade. The Treasury head noted recently that Ireland’s downgrade experience suggests a local downgrade could lift NZ interest rates by 1.5 percentage points. 
• A lift in debt-servicing costs for households and businesses would hamper NZ’s economic recovery and cost jobs.  Ireland is a relatively extreme example, but other countries suffering downgrades now have higher risk premia.

Read the full PDF report.

In order to read these documents you will need to have Adobe Acrobat Reader. If you do not have this software installed on your computer, please click on the Adobe link below to download it. (The software is free of charge).