Major rating agencies issued statements after Australia's general election on Saturday. Moody’s Investors Service said there were limited implications for now for Australia’s AAA grade, while Fitch Ratings said a wider deficit could put downward pressure on the score. S&P Global Ratings said it could lower the rating if parliamentary gridlock on the budget continues.
“Looking ahead, trends in Australia's credit profile will be determined by whether fiscal objectives are effectively implemented, whether external financing conditions remain favourable and how housing market developments affect domestic growth and financial conditions,” said Marie Diron, senior vice president at Moody's.
A deeply divided electorate heightened fears that Australia could be consigned to three years of minority government and thereby paralyse its budget reform. Rating agencies have been patient with the political process up to now, but there are signs time might be running out. A downgrade would be a major blow to confidence and could see a spate of bank and corporate downgrades.
The Liberal-National coalition leads in 66 seats compared to 72 seats for the Labour Party with both falling short of the 76 seats required to hold a majority in the lower house. Vote count will resume on Tuesday when the final results are expected. According to Bloomberg, postal votes may decide as many as 12 unclear seats.
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