Auckland's budgetary performance remains relatively weak and debt is high compared with peers' as Auckland builds its infrastructure.


  • Auckland Council's experienced financial management team has contained its debt levels amid substantial demand for infrastructure.
  • Auckland's budgetary performance remains relatively weak and debt is high compared with peers' as Auckland builds its infrastructure.
  • We are affirming our 'AA' long-term and 'A-1+' short-term issuer credit ratings on Auckland.
  • The stable outlook reflects our expectation that the council will continue to manage the city's growth pressures and large capital expenditure requirements while limiting additional new borrowing.


Downside Scenario
Downward rating pressure might arise if we consider its financial management 
is weakening, resulting in higher deficits and debt levels. This could occur 
if infrastructure spending substantially increases without offsetting 
revenues, leading to after-capital account deficits underperforming our 
forecasts. This would result in debt rising to more than 270% of operating 
revenues.  

Upside Scenario 
Upward pressure on the ratings is unlikely, given the city's growth pace, size 
of its capital-expenditure requirement, and the rating on New Zealand. An 
upgrade could occur if we raised the rating on the New Zealand sovereign and 
Auckland's financial position also substantially improved through higher 
revenues to fund its capital expenditure, and reduced borrowings.

RATIONALE
We have affirmed the ratings on Auckland after updating our forecasts until 
2020. Supporting the ratings on Auckland are New Zealand's institutional 
settings and the council's experienced management team that has delivered the 
city's large infrastructure program to support Auckland's strong population 
growth. This large infrastructure program is leading to sustained deficits and 
relatively high debt levels compared with domestic and international peers'. 
To cover potential risks associated with this program, Auckland maintains a 
high level of liquidity coverage.