Weaker external demand raises fiscal risks in Australia, New Zealand – Fitch

FXStreet (Mumbai) – Fitch Ratings noted in its latest report that tough economic environment, especially weaker external demand conditions, “has affected the fiscal outlook for Australia and New Zealand, resulting in delays to budget consolidation and potentially higher credit risks over the medium term.”

“Slowing external demand has led directly to weaker terms of trade. This has in turn resulted in budget deterioration, owing mainly to weakness on the revenue side, with lower nominal GDP growth likely to weigh on tax receipts, “it said.

Report further stated, “According to the latest mid-year budget updates between fiscal years 2016-2019, Australia’s underlying cash balance relative to GDP is now expected to be on average 0.4ppt lower each year, while New Zealand’s Operating Balance Excluding Gains and Losses (OBEGAL) is on average 0.3ppt lower.”

Both the Australian and New Zealand economies are vulnerable to high external indebtedness and commodity dependence, and run large current account deficits.

Fitch Ratings noted in its latest report that tough economic environment, especially weaker external demand conditions, “has affected the fiscal outlook for Australia and New Zealand, resulting in delays to budget consolidation and potentially higher credit risks over the medium term.”

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