Rating Australia highly

Moody’s has economy among world’s best, says weakness won’t linger

RATINGS agency Moody’s says Australia’s economy will not come out of the COVID-19 crisis permanently weaker, paving the way for the country to remain one of the few Aaa-rated nations in the world.

In a report released yesterday, Moody’s said despite a record contraction in the June quarter, Australia was “unlikely to face a lasting drop in potential growth or weakening in fiscal strength over the longer term”.

The welcome vote of confidence from one of the three major international ratings agencies comes as the nation charts a brisk path out of the

COVID-19 recession.

Moody’s said the federal government’s “substantial policy response is helping viable companies to survive the related shock to demand and to avoid the destruction of productive capacity”.

“Stimulus in response to the coronavirus outbreak does not significantly threaten fiscal strength over the longer term,” its report says.

“Rather, the package highlights Australia’s flexibility and capacity to use fiscal policy to support its credit profile in a difficult global economic environment.”

But Moody’s warned that “a major driver of Australia’s potential growth rate will be the extent to which productivity growth picks up from the relatively weak levels experienced before the pandemic” — underlining the need for further policy reform as the economy transitions off emergency income support.

Losing the AAA credit rating would mean the government had to pay more for its debt.

The update from Moody’s came as the Australian sharemarket rallied to be near where it started the year after Wall Street’s blue-chip index reached historic heights.

Australia’s key stockmarket benchmark, the ASX 200, broke through 6700 points in early trade yesterday before finishing 0.5 per cent stronger at 6683 points — just shy of the 6684.1 points it was at when 2020 began.