Bangkok--14 Jan--Standard & Poor's
Standard & Poor's Ratings Services today said that it had affirmed its 'AAA/A-1+' foreign and local currency sovereign credit ratings on the Commonwealth of Australia. The outlook is stable. The ratings on Australia reflect our opinion of the country's sound government finances, resilient (albeit slowing) economy, and transparent policy environment with strong institutions.
Public sector finances underpin the ratings and stable outlook on the Australian government. The central government is in a net creditor position, which we estimate to be 3% of GDP at June 30, 2009. Furthermore, we observe that the government has been building up financial assets to fund its pension obligations, improving Australia's inter-temporal fiscal position. While we forecast that the government will report a cash deficit of about 1% of GDP in the fiscal year ending June 30, 2009—due to a cyclical weakening in revenue, higher social welfare payments, and counter-cyclical policy measures—we believe that this deficit does not materially alter the robust profile of the country's public finances. What's more, the strength of the government's balance sheet provides flexibility to absorb cyclical deficits of this nature.
"The most identifiable risk to the ratings on Australia would be a significant weakening in the credit quality of the country's bank sector," Standard & Poor's credit analyst Kyran Curry said. "The Australian banks are expected to remain profitable, adequately capitalized, and with good asset quality by international standards. They have limited exposure to sub-prime investments and offshore financial institutions that have been experiencing credit problems. Nevertheless, the slowing in the Australian economy will, in our view, increase problem bank loans, particularly if the local unemployment rate increases markedly. If the financial sector's key credit metrics deteriorate, downward pressure could rise on the ratings on the Australian banks and, in turn, the ratings on Australia."
Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. Standard & Poor's (Australia) Pty. Ltd. does not hold an Australian financial services license under the Corporations Act 2001. Any rating and the information contained in any research report published by Standard & Poor's is of a general nature. It has been prepared without taking into account any recipient's particular financial needs, circumstances, and objectives. Therefore, a recipient should assess the appropriateness of such information to it before making an investment decision based on this information.
Complete ratings information is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; select your preferred country or region, then Ratings in the left navigation bar, followed by Find a Rating.
Media Contact:
David Wargin, New York (1) 212-438-1579, [email protected]
John Piecuch, Paris (33) 1 4420-6657, [email protected]
Analyst Contacts:
Kyran Curry, Melbourne (61) 3-9631-2082
Brendan Flynn, Melbourne (61) 3-9631-2042
Key Contacts:
Americas Media Relations: (1) 212-438-6667
media_ [email protected]
Americas Customer Service: (1) 212-438-7280
[email protected]