Despite all the naysayers in 2020, after 17 months Australia has regained a AAA credit rating with a stable outlook from all three major ratings groups – S&P Global, Moody’s and Fitch.
It is one of the few countries around the world to have lost and regained a AAA rating stable outlook from not one, but two of the trio of ratings groups since the pandemic started in March, 2020.
The pandemic saw S&P quick to cut our rating to AAA negative in April, 2020 and Fitch followed suit in June.
Moody’s though didn’t change the rating and reaffirmed it June last year and again earlier this year as it showed more confidence in Australia than its two rivals.
S&P upgraded the rating to a stable outlook in June.
Yesterday Fitch followed suit even though it downgraded is GDP forecasts for this year and lifted the estimate for 2022.
Fitch’s upgrade came amid expectations of a continued strong recovery from the pandemic crisis and improvement in fiscal and the country’s external performance over the medium-term despite a near-term setback from recent pandemic-related lockdowns.
Fitch said the upgrade and AAA stable rating was underpinned by the country’s strong institutions and effective policy framework, which supported nearly thirty consecutive years of economic growth prior to the pandemic and helped limit the severity of the current shock.
Fitch lowered its 2021 GDP growth forecast to 3.7% The government and RBA are around 4%), from 5.8%, while growth is expected to pick up to 4.5% in 2022.
Fitch saw the solid growth outlook helping the labour market “snap back rapidly with the unemployment rate forecast to average 4.7 per cent in 2022”.
Fitch also noted “the pace of vaccination has accelerated in recent months, allowing a gradual easing in restrictions that will facilitate a strong rebound in consumption from pent-up demand, particularly as households have large accumulated savings to draw down, and targeted fiscal support has remained during the lockdowns.”
Australian joins Germany, Netherlands, Singapore, Norway, Denmark, and Luxembourg with AAA stable ratings, the highest there is.