Australia’s sovereign rating outlook was downgraded by Standard & Poor’s Global Ratings on Thursday, without any remedial actions.
The outlook on ‘AAA’ rating was lowered to negative from stable. Accordingly, there is a one-in-three chance that the rating would be downgraded within the next two years if it believes that the Parliament is unlikely to legislate savings or revenue measures.
On credit ratings, the agency said along with strong institutions, a credible monetary policy, and floating exchange rate regime, Australia’s public finances have traditionally been a credit strength for the sovereign rating.
S&P noted that without any forceful policy decisions, the government’s fiscal stance may no longer be compatible with the country’s high level of external indebtedness.
Australia’s fiscal position continued to weaken delaying an eventual return to budget surpluses since the global financial crisis.
Given the outcome of the July 2, 2016, double-dissolution election, in which neither of the traditional governing parties may command a majority in either house, fiscal consolidation is likely to be further postponed, the rating agency said.
The net general government debt is forecast to remain low but to peak a little higher than previously thought, at about 23 percent of GDP, reflecting the revised fiscal outlook, S&P added.
The agency estimates the economy to grow around 3 percent in fiscal year 2016, while it noted that the unemployment rate has fallen from last year’s cyclical high. The real per capita GDP growth is expected to average around 1.3 percent per year over 2016-2019.
The material has been provided by InstaForex Company – www.instaforex.com