Questions for Oral Answer — Questions to Ministers, Questions to Members 4 October 2011 – Hansard

Hon Phil Goff: Is it correct that New Zealand’s credit rating with those two agencies is now the same as Spain’s—a country that National has constantly derided as being an economy in trouble?

Rt Hon JOHN KEY: I cannot confirm that. It may well be; it sounds logical. But let me quote this from Fitch Ratings: “New Zealand remains well placed amongst the world’s highly-rated sovereign credits, with its creditworthiness supported by moderate public indebtedness, fiscal prudence, and strong public institutions.” But I will say this: when Standard and Poor’s was giving a meeting in New Zealand about a month ago, what it did say was that there was about a 30 percent chance that we would be downgraded. That is what happens when one is on a negative outlook. It did go on to say, though, that if there was a change of Government, that downgrade would be much more likely.

So, it has emerged that the prime minister’s … er … let’s say paraphrase of rating agency Standard and Poor’s [alleged] response to the idea of ‘a change of Government’ wasn’t actually quite as solidly based as a casual observer might have supposed.

Here’s how Mr Key handled questions about his anyway-you-look-at-it unequivocal ‘It did go on to say …’ 4 October claim a week later at Monday’s (10 October) post-cabinet press conference …

John Key explains his Standard & Poor’s comments Oct 2011 from The Paepae on Vimeo.

This is an extract from New Zealand Prime Minister John Key’s post cabinet media briefing in Wellington 10 October 2011. Mr Key explains his earlier comments in Parliament indicating rating agency Standard & Poor’s would regard a downgrade in NZ’s credit rating as ‘much more likely’ ‘if there was a change of government’ were not based on comments from Standard & Poor’s.
S&P have since denied making any such statement. He explains that he drew his comments from an email report he received from a National Party supporter describing an ‘inference’ and thought Mr Key could ‘use’ the comments.
This video is an extract from a longer video available at: www.scoop.co.nz/stories/HL1110/S00121/audio-pms-post-cab-presser-monday-10-october-2011.htm

Not very convincing? No, I didn’t think so either. It’s been a while since I attended one of those post-cabinet media conferences at the Beehive, but it’s clear the press gallery still hunts as a pack. TV3’s Patrick Gower called it ‘a personal credibility downgrade‘ …

The big problem for Mr Key is the agency says it said no such thing.
“At no stage have we said that a rating downgrade was more likely if there were a change of Government,” the agency said in a statement today. …

Mr Key has received what’s effectively a personal credibility downgrade from a clearly unimpressed Standard and Poor’s. His actions on this one can easily be judged by that old saying in politics – explaining is losing.

It seems clear Mr Key didn’t have a firm basis for his ‘one-liner’ statement. It went beyond ‘inference’ and the resultant witch hunt for his ‘politically motivated’ informant at the meeting of economists is interesting to watch (see Audrey Young’s ‘Who wrote John Key’s mystery S&P email?‘ in today’s NZ Herald.

Time will tell whether this or the oil spill off Tauranga tests Mr Key’s political teflon coating more.

– P

Update: Here’s the text of Mr Key’s informant’s email, released by the prime minister’s office (courtesy Alex Tarrant interest.co.nz):

Hi John

I was part of a session with a range of economists yesterday morning – every year they do this session – with economists from Aus plus all the main NZ banks, and this year two from Standard and Poors, (sic) including the guy who obviously has a lot to do with the NZ grading.

Anyway, the S&P guys were very complimentary about how the NZ Govt is managing fiscally and their trust that what you say will happen happens, and your unwavering commitment to getting NZ’s balance sheet sorted for the long term.

But there was a key one-liner that I thought you could well use. S&P said that there was a 1/3 chance that NZ would get downgraded and a 2/3 change it would not, and the inference was clear that it would be the other way around if Labour were in power. They discussed the impact on interest rates if NZ got downgraded and how that would quickly impact on the home owner mortgage market, so net there is a much higher risk to NZers that they will face higher interest rates under a Labour Government.

Don’t know how you use it but they were quite serious.