Ratings group, Standard & Poor’s has reaffirmed its AAA rating for Australia and maintained its negative outlook.
S&P’s decision two weeks after the 2020-21 federal budget (which was endorsed by all three ratings groups, Moody’s Fitch and S&P immediately after it was delivered means Australia is now just one of nine countries with a AAA credit rating.
Moody’s has Australia on a AAA stable rating while Fitch has Australia on a AAA rating with a negative outlook.
S&P’s report said Australia’s recent federal budget had large economic stimulus packages which would support economic recovery, but fiscal deficits would persist and debt levels would remain elevated for years to come.
It said the credit rating could be downgraded further if the coronavirus crisis deepened further but conversely could take the AAA negative rating to a AAA stable rating should Australia recover more quickly than anticipated.
S&P projected Australia’s budget deficit for 2020-21 would be about 14% of GDP but would be just 4% by 2023.
S&P said the federal government’s “balance sheet was strong before the pandemic” and that “Australia’s budget improved in recent years on the back of tight fiscal discipline, strong labour market conditions, and high commodity prices.”
S&P added that “Australia’s typically strong fiscal performance remains a credit strength for the rating” and that “Australia’s economy is beginning to recover from its first recession in almost 30 years” and will “rebound strongly once borders open”.