ACT Party Leader Don Brash today said that the news that New Zealand’s long-term foreign credit rating has been downgraded did not surprise him, noting that he had been saying for many months that New Zealand has become too heavily dependent on foreign savings because we’ve been achieving inadequate growth in both domestic incomes and exports.

“Low growth in incomes means low growth in savings, and the weak growth in export volumes reflects the big growth in Government spending,” Dr Brash said.

The former Reserve Bank Governor said that the Government has not done nearly enough in the last three years to improve New Zealand’s growth prospects, or to cut back on Government spending and taxation. He pointed out that the Government’s 2011 Budget actually projected the current account deficit to increase over the next three or four years.

“The Government has dropped the ball here. The fiscal deficit has increased from $4 billion in the year to June 2009, to $6 billion in the year to June 2010, and to $18 billion in the year to June 2011. Only about one third of the $18 billion is related to the Christchurch earthquakes,” Dr Brash said.

Fitch, the agency that downgraded New Zealand’s rating, has said that “New Zealand’s high level of net external debt is an outlier among rated peers – a key vulnerability that is likely to persist as the current account deficit is projected to widen again”.

Dr Brash said it was critical that the Government make bold decisions to improve New Zealand’s growth prospects, and that more vigorous action to correct the fiscal situation was urgently needed

via Credit Downgrade Was Avoidable says Brash | ACT New Zealand.