While the governments of the U.S. and the U.K. carry on their massive borrowing acts as if there is no tomorrow, it seems that the government in New Zealand has given a strong commitment to international ratings agencies that we will not be following suit.
Treasury's forecasts in December for the Crown's deficits to grow alarmingly in the years ahead had been weighing down on potential investors in NZ-dollar denominated debt - meaning that getting access to long-term financing offshore had become very hard to get.
The government's re-assurances to international investors that it won't allow the Crown's balance sheet to get out of control (triggering a Sovereign Credit Downgrade) - is good good news for employers looking to grow or maintain their business with bank funding.
The government's re-assurances have apparently assisted ANZ National Bank to raise US$1 billion through an issue of government guaranteed three year bonds to US investors last Friday - its first long dated fund raising exercise since July of last year.
That will assist to counter the upward pressure on longer-term interest rates seen lately, but it also must mean that government departments are under enormous pressure to ensure that the re-assurances that the Government has clearly given to financial markets are fully met in Budget 2009.
The worst thing that could happen now is if the government disappoints foreign investors after it has given clear messages that the New Zealand Government is serious about maintaining strong Crown accounts and that the New Zealand Government is taking action to avoid any downgrade by international ratings agencies.
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