While the downgrading of New Zealand’s sovereign credit rating has been pinned largely on the Christchurch earthquakes, high agricultural debt has also been singled out as a problem.

Last week, two credit rating agencies, Fitch, and Stand and Poor’s, downgraded New Zealand’s foreign and local currency ratings.

Standard and Poor’s credit analyst, Kyran Curry, says the downgrading was because New Zealand’s external position is expected to deteriorate on the back of spending pressures and fiscal stimulus to support growth.

However, high levels of both household and agricultural debt coupled with New Zealand’s dependence upon commodity prices also contributed to the downgrading says Curry.

Federated Farmers president Bruce Wills says the downgrading is a wakeup call for New Zealand farmers.

 “The downgrade is disappointing because that will add a margin to our cost of funds. But I think in my view it was useful reminder to New Zealand we get in the habit of sitting here and watching debt issues in other places of the world.

“Something that I’ve constantly reminded audiences of is the fact that New Zealand is a very heavily indebted country.”     

Mr Wills says the level of private debt, in New Zealand, at $47 billion, is amongst the highest in the world, and we must cap, and then reduce it.

“Listen we mustn’t forget that $47 billion. It’s still, in my view the elephant in the room when it comes to the farming community.

“It’s a level of debt that I don’t think is sustainable long-term in our farming community. And what we saw last week was international recognition of that and a warning for us to take heed and work hard to reduce this debt level.”