Bangkok--25 Sep--Standard & Poor's
Standard & Poor's Ratings Services said today that it has affirmed its unsolicited 'AAA' long-term and 'A-1+' short-term sovereign credit ratings on the Commonwealth of Australia. The outlook remains stable.
"The ratings on Australia reflect Standard & Poor's view of the country's ample fiscal and monetary policy flexibility, economic resilience, public policy stability, and its sound financial sector," said credit analyst Kyran Curry, of the Sovereign Ratings group. "We believe these factors demonstrate Australia's strong ability to absorb large economic and financial shocks, such as the global recession in 2009. These strengths are moderated by Australia's high reliance on external savings and commodity income to fund growth, its high household debt, and emerging fiscal pressures associated with an aging population."
The Australian economy performed relatively well in the year ended June 30, 2011, as mining exports and private investment in mining and liquefied natural gas offsettemporary economic weakness associated with natural weather disasters. We believe the economy has favorable prospects for sustained growth while there remains strong demand for commodities from emerging Asia, particularly China.
Mr. Curry added: "In our view, the Australian economy's overall resilience, including to the global downturn in 2009, reflects decades of structural reforms, wages restraint, and a sound savings rate. However, Australia has what we consider to be strains on its financial sector compared to other highly rated sovereigns, reflecting its heavy external borrowings to partly fund investment in its mining sector. Although there has been private-sector deleveraging in recent years, including by households, we believe that the high debt burden will constrain growth in domestic consumption over the next three years as the government withdraws fiscal stimuli. That said, we predict that the robust outlook for commodity prices, allied with a strong pipeline of mining investment, will underpin a return to trend growth of 3.5% by 2013."
The stable 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 in place. Moreover, our base-case scenario assumes that fiscal consolidation will continue, and that the general government debt burden will remain low and on a declining trajectory.
Conversely, the ratings could be lowered if, against our expectations, there is a protracted deterioration in the fiscal balance, leading to persistent growth in the public debt burden. A weakening in the external environment, or in the credit metrics of the financial system, may lead to a lowering in the ratings given Australia's high reliance on external savings and commodity income to fund growth.
This unsolicited rating(s) was initiated by Standard & Poor's. It may be based solely on publicly available information and may or may not involve the participation of the issuer. Standard & Poor's has used information from sources believed to be reliable based on standards established in our Credit Ratings Information and Data Policy but does not guarantee the accuracy, adequacy, or completeness of any information used.
Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
AUSTRALIA
Standard & Poor's (Australia) Pty. Ltd. holds Australian financial services licence number 337565 under the Corporations Act 2001. Standard & Poor's credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).
Media Contact:
John Piecuch, New York (1) 212 438.1579,
[email protected]
Analyst Contact:
Kyran Curry, Melbourne (61) 3-9631-2082