S&P downgrade shows Government's economic management in disarray

Standard and Poor's sovereign credit downgrade this afternoon is further evidence that the Government's economic management is in disarray, Green Party Co-leader Dr Russel Norman said today.

Standard & Poor's has cut its long-term foreign currency ratings on New Zealand to 'AA' from 'AA+' and its long-term local currency rating on New Zealand to 'AA+' from 'AAA'.

"The bad economic news of this morning's downgrade has just gotten worse," said Dr Norman.

"The National Government has not been a smart economic manager through these difficult times and now it's going to increase the cost of borrowing for us all.

"Fitch's downgrade earlier today focused on the widening current account deficit. Standard and Poor's have focused on the Government's poor fiscal management, citing a blow-out in borrowing to pay for the rebuild of Christchurch and National's stimulus package of tax cuts.

"The Government's failure to consider revenue-raising options, in the form of an earthquake levy to help pay for the rebuilding of Christchurch, is now being shown up as short-sighted.

The Green Party warned on March 24, 2011, that New Zealand faced the risk of a credit downgrade due to the Government relying solely on borrowing to pay for the rebuild of Christchurch instead of striking a levy.

"The Green Party's temporary earthquake levy would have raised an additional $1 billion each year to cover quake-related expenditure avoiding costly borrowing and the chance of a downgrade.

"Australia raised a levy after their flood disaster and their Government was, at the time, in a much better fiscal position than ours.

"National must also accept responsibility for their poorly timed and poorly designed tax cuts — cuts which helped fuel record levels of Government borrowing and failed to effectively stimulate the economy in recession.

"The New Zealand economy has many strengths, but our current economic managers in the Beehive are not one of them," Dr Norman said.