Australia maintains triple-A credit rating

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Australia’s huge budget deficit and government debt topping $1 trillion for the first time doesn’t seem to be troubling the world’s major credit rating agencies, at least at this stage.

On 20 October, Standard & Poor’s confirmed Australia’s AAA credit rating.

Australia is one of very few countries in the world to hold the top-tier triple-A rating from all three key credit rating agencies – Standard & Poor’s, Moody’s Investors Service and Fitch Ratings.

However, Standard & Poor’s warned that Australia may not maintain the AAA rating if the pandemic prolongs causing damages to the economy.

Moody’s Investors Service also noted the significant increase in Australia’s debt levels to come, saying it was consistent with the nation’s triple-A rating “at this point”.

“Its experience with fiscal repair following past shocks and the likelihood of an extended period of low servicing costs mean that its debt remains manageable,” Moody’s vice president Martin Petch said in a statement.

The key risk was whether Australia would be able to meet the growth forecasts, including the forecast expansion in 2021/22.

The budget papers predict an economic growth rate of 4.75 per cent in the next financial year after a 1.5 per cent contraction in 2020/21.

Like S&P, Fitch also revised Australia’s outlook to negative earlier this year to reflect the impact of the pandemic shock on the economy and public finances.

“Australia came into the coronavirus shock with fiscal space to counter the effects of the pandemic in the near term,” Fitch said in a statement.

It says while the budget deficits are wider and debt is higher than previously anticipated, the medium-term debt trajectory is in line with its expectations.

“From a rating perspective, the medium-term debt trajectory is key,” it says.

Source: Yahoo

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