S&P holds NZ at AA+ stable; Moody’s and Fitch still negative

S&P Global Ratings has affirmed New Zealand’s long-term foreign-currency sovereign rating at AA+ and local-currency rating at AAA, both with short-term A-1+ and a stable outlook on the long-term ratings.

The research update, dated on or about 28 August 2026 and reported by Investing.com, projects annual GDP growth of about 2.5% in the year to 30 June 2027 after a weak period.

S&P expects the general government deficit to widen to 5.1% of GDP in fiscal 2027 before improving to below 4% in fiscal 2028. Net general government debt is projected to stabilise at 38%–39% of GDP over the next three years.

Finance Minister Nicola Willis welcomed the decision as external validation of the Government’s fiscal repair path. She said New Zealand is one of just 18 economies with an AA+ or better rating.

The affirmation is only part of the ratings picture. Moody’s still assigns Aaa but shifted the outlook to negative on 22 April 2026. Fitch cut its AA+ outlook to negative on 20 March 2026. Morningstar DBRS rates New Zealand AAA stable.

S&P cites monetary-policy flexibility, a wealthy economy, relatively low net public debt and strong institutions as supports. It says those strengths offset external imbalances and ongoing fiscal deficits.

The agency estimates the current-account deficit near 3.2% of GDP in fiscal 2026, down from a peak of about 8% in fiscal 2022. Stats NZ put the annual deficit at 3.6% of GDP in the year to March 2026.

Treasury track versus S&P numbers

Treasury’s Budget Economic and Fiscal Update 2026, published 28 May 2026, is the domestic benchmark agencies watch. OBEGALx is forecast at a $11.9 billion deficit (2.6% of GDP) in 2025/26 and $11.4 billion (2.4%) in 2026/27.

The same BEFU path swings to a $2.6 billion surplus (0.5% of GDP) in 2028/29 and $6.1 billion (1.1%) in 2029/30 — one year earlier than the prior HYEFU track.

Net core Crown debt is projected to peak at 46.1% of GDP in 2027/28 then ease to 44.4% by 2029/30. Nominal debt rises from $182.2 billion in 2024/25 toward $246.1 billion by 2029/30.

The Fiscal Strategy Report 2026 restates targets to push core Crown expenses toward 30% of GDP, restore OBEGALx surplus by 2028/29, and bend net core Crown debt down toward 40% of GDP.

Interim Financial Statements for the eleven months to 31 May 2026 showed the OBEGALx deficit $3.0 billion smaller than BEFU and net core Crown debt $2.8 billion lower. That early outturn supports the consolidation narrative if it holds through year-end.

Fitch’s June 2026 Budget note acknowledged the earlier surplus date, lower debt ratios and a $6 billion cut in planned bond issuance over fiscal 2026–30. It still stressed that growth delivery remains critical.

S&P’s general-government deficit path (widening to 5.1% of GDP in FY27) sits wider than Treasury’s core OBEGALx ratios. Different perimeter definitions explain much of the gap; residual cash needs remain a live agency concern.

Why the stable call still matters for households

Willis said rating decisions can move markets and that downgrades raise borrowing costs for governments and people. New Zealand Debt Management’s NZGB programme and Crown-linked issuers such as the Local Government Funding Agency price off the sovereign ceiling.

Commercial banks fund heavily in wholesale markets. A stable high sovereign floor supports bank senior and covered-bond spreads that feed into mortgage and business loan pricing.

The 10-year New Zealand Government Bond yield hovered near 4.73%–4.77% in late August 2026, according to Trading Economics series cited in market data. The OCR stands at 2.50% after the Reserve Bank’s 25 bp rise on 8 July 2026.

NZD/USD traded near 0.592 in the same period, with a 52-week range of about 0.558–0.609 on Yahoo Finance data.

Australia retained S&P’s AAA/A-1+ with a stable outlook as of 6 August 2026. That peer gap keeps New Zealand one notch below the full AAA club at S&P on the foreign-currency rating.

Agency scorecard and delivery tests

S&P’s Asia-Pacific sovereign score snapshot awards New Zealand top marks on institutions, economy and monetary policy. Fiscal budget performance and external accounts score weaker.

Upside scenarios require structural deficit compression below 3% of GDP and stronger debt and interest metrics. Downside scenarios include failure of the deficit to narrow as forecast or sustained per-capita growth lag versus advanced peers.

Moody’s April 2026 negative outlook cited global uncertainty, sticky inflation including fuel, weaker growth, tight monetary policy and higher debt-servicing costs that risk delayed consolidation. Fitch’s March 2026 move pointed to delayed consolidation and measures likely after the 2026 election.

Export-oriented sectors — dairy, horticulture, meat and tourism — are the growth engines S&P highlights. Domestic demand remains fragile amid high living costs and subdued confidence.

For New Zealand households and firms, the near-term channel is funding costs, not the rating letter itself. Delivery of the BEFU surplus in 2028/29, a debt peak below 46% of GDP then decline, and further current-account narrowing will decide whether Moody’s and Fitch negative outlooks lift — or whether S&P’s stable stance comes under fresh pressure.