Powered by momentummedia
nestegg logo
Powered by momentummedia
nestegg logo
nestegg logo

Invest

Australia could lose AAA rating

By Lachlan Maddock · April 09 2020
Reading:
egg
egg

Invest

Australia could lose AAA rating

By Lachlan Maddock
April 09 2020
Reading:
egg
egg
Australia could lose AAA rating

Australia could lose AAA rating

author image
By Lachlan Maddock · April 09 2020
Reading:
egg
egg
Australia could lose AAA rating

Australia’s credit outlook has been downgraded from “stable” to “negative” by one of the world’s pre-eminent ratings houses – and its AAA rating could be next.

The government’s three stimulus packagers – totaling more than $300 billion – will see Australia’s debt burden weaken materially, resulting in S&P Global Ratings downgrading its credit outlook from “stable” to “negative” while reaffirming its AAA rating.

“S&P’s action today, in reaffirming our AAA rating, is a reminder of the importance of maintaining our commitment to medium-term fiscal sustainability,” said Treasurer Josh Frydenberg.

“Our disciplined economic and budget management, which saw the federal budget return to balance for the first time in 11 years, meant the budget as noted by S&P ‘was on track to achieve a surplus in fiscal 2021 before the COVID-19 outbreak’.”

S&P said Australia’s economy was “well placed” to recover due to pent-up demand, low interest rates and a large infrastructure pipeline – but flagged a downgrade if the economy didn’t bounce back as expected.

Advertisement
Advertisement

“We could lower our rating within the next two years if the COVID-19 outbreak causes economic damage that is more severe or prolonged than what we currently expect,” S&P said. “With household indebtedness at elevated levels, this could delay the process of repairing the government balance sheet beyond what we expect currently. Government indebtedness and interest costs will remain at elevated levels.”

And a possible downgrade could also have widespread consequences for Australia’s banks.

“News today that Standard & Poor’s may cut the Australian government’s prized AAA credit rating could have wider consequences for Australian companies whose own ratings are dependent on the government’s rating,” said Asmita Kulkarni, director of investment strategy at FIIG. “There is a risk of broader downgrades including the ratings of the four major banks.”

Australia is one of only 10 countries in the world to have a AAA credit rating from the major ratings houses – a group that also includes Finland, Germany and Luxembourg.

 

 

Australia could lose AAA rating
Australia could lose AAA rating
nestegg logo

Forward this article to a friend. Follow us on Linkedin. Join us on Facebook. Find us on Twitter for the latest updates
Rate the article

Join the nestegg community

We Translate Complicated Financial Jargon Into Easy-To-Understand Information For Australians

Your email address will be shared with nestegg and subject to our Privacy Policy

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.