New Zealand earns AAA rating as economy steadies, lending confidence grows

Global ratings agency Morningstar DBRS has awarded New Zealand a AAA sovereign credit rating with a stable outlook, highlighting the nation’s prudent fiscal management, credible monetary policy, and resilient financial system.

The firm’s first public rating for New Zealand reflects growing international confidence in the economy as it stabilises following a period of tight monetary policy. Morningstar DBRS said the rating “reflects our view the economy is rebalancing following tight monetary policy and as the government works to tidy the books,” RNZ reported.

Recent data supports that view, with unemployment edging up to 5.3% but building consents rising for a third straight month — signs the economy is cooling without collapsing, while low inflation and easing rates set the stage for gradual recovery.

The Reserve Bank’s latest Financial Stability Report echoed this sentiment, noting that while risks remain heightened due to global uncertainty, New Zealand’s banks are well-capitalised and resilient enough to support an economic recovery.

The agency expects economic growth to pick up in 2026, supported by lower interest rates and easing global uncertainty.

Fiscal strength and moderate debt levels

Julia Specht, Morningstar DBRS assistant vice president for global sovereign ratings, said while fiscal consolidation will be important over time, New Zealand’s debt position remains enviable among advanced economies.

“At this point we’re not concerned about deficits today but we need to see some consolidation over the medium-term to put public finances on a more sustainable path,” Specht said.

She noted that government debt remains low compared to peers.

“The average public debt ratio to GDP for advanced economies is about 110%  or so, and New Zealand’s is less than half of that,” Specht said.

Financial stability underpins AAA confidence

Morningstar DBRS said New Zealand’s financial system has weathered recent housing corrections well, thanks to robust capital levels and responsible lending standards.

“A lot of that is due to the well-capitalised banks that are also very liquid, and they have strong buffers to absorb losses,” Specht said.

Loan-to-value (LVR) and debt-to-income (DTI) restrictions have also contained riskier lending. While overdue loans have edged up amid softer economic conditions, non-performing loans remain low, and stabilising house prices have eased risks to financial stability, RNZ reported.

What it means for mortgage advisers

For mortgage advisers, New Zealand’s AAA rating reinforces confidence in the nation’s lending system and property market stability, supporting more positive credit conditions heading into 2026.

Lower rates, steady employment, and recovering construction activity are expected to drive renewed lending demand, particularly in refinancing and new-build sectors.

With strong fundamentals and credible policy settings, brokers can help clients make the most of an improving borrowing environment.

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