S&P affirms Australia's triple A rating, stable outlook
2012-09-19 12:26:43
Australia's triple-A credit rating was affirmed by Standard & Poor's on Wednesday citing the country's policy flexibility and economic resilience.
The rating agency maintained the 'AAA' long-term and 'A-1+' short-term sovereign credit ratings and also affirmed the stable outlook.
The ratings reflect its view on Australia's ample fiscal and monetary policy flexibility, economic resilience, public policy stability, and a financial sector that appears to be sound, S&P said in a statement.
Such factors demonstrate Australia's strong ability to absorb large economic and financial shocks, such as the global recession in 2009, the agency said. However, the country's high external imbalances, dependence on commodity exports, and high household debt weigh on its growth prospects, S&P added.
"The Australian economy performed relatively well in the fiscal year ended June 30, 2012, as mining exports and private investment in mining and liquefied natural gas offset weaknesses in domestic consumption and export sectors exposed to the high Australian dollar, such as education, tourism, and manufacturing," Standard & Poor's credit analyst Kyran Curry said.
"Yet considerable risks remain for Australia's growth prospects, prosperity, and credit quality. These stem from its growing dependence on trade with China."
A weakening in the demand for Australia's resources could lead to a range of disorderly dislocations in its economy, including in its labor and property markets, Curry warned.
On the public finances front, the deterioration due to the global recession has been more contained than for most 'AAA' rated peers, S&P said.
The agency expects Australia's general government to record a deficit of 2.5 percent of GDP in 2012, and return the balance to surplus in 2015. The general government debt burden is seen rising by 1.3 percent of GDP to 23.4 percent in 2012.
The country's fiscal deficit is seen at 1.1 percent of GDP in 2013 and the debt burden seen at 23 percent, is expected to trend lower thereafter.
While Australia's government debt level is significantly lower than that of other 'AAA' sovereigns, the country's private sector debt is among the highest of any rated sovereign and remains a key vulnerability, the agency pointed out.
"The stable rating outlook reflects our view that Australia's public finances will continue to withstand potential adverse financial and economic shocks, and our belief that the country's consensus in favor of prudent budgetary policies will remain," Curry said.