Moody’s warns Aus­tralia may lose cov­eted ‘AAA’ sta­tus

New Straits Times - - Business -

Rat­ings agency Moody’s In­vestor Ser­vice said Aus­tralia may lose its “AAA” sov­er­eign credit rat­ing should the coun­try’s con­ser­va­tive govern­ment give up on deficit re­pair, rais­ing the stakes ahead of the an­nual bud­get in May.

“If we saw the govern­ment’s pri­or­i­ties shift­ing away from a fis­cal con­sol­i­da­tion, it would be a trig­ger for a rat­ings down­grade, but it’s not our base­line as­sump­tion,” said Marie Diron, as­so­ci­ate man­ag­ing di­rec­tor at Moody’s yes­ter­day.

Lower wage and profit growth are over­shad­ow­ing a rally in coal and iron ore prices and the govern­ment has failed to get so­called “zom­bie” sav­ings mea­sures through a hos­tile se­nate, threat­en­ing at­tempts to rein in a A$37 bil­lion (RM124 bil­lion) bud­get deficit.

Diron em­pha­sised that Aus­tra lia’s ro­bust in­sti­tu­tional frame­work and stronger fis­cal met­rics than many of its sim­i­larly rated peers jus­ti­fied a “AAA” rat­ing and the out­look re­mained sta­ble.

“The rat­ing is not tied to cer­tain thresh­olds in terms of fis­cal debt or deficit mea­sures, it’s more tied to the ca­pac­ity of the govern­ment to sup­port its econ­omy with­out en­dan­ger­ing pub­lic fi­nances,” said Diron.

Aus­tralia is one of only a dozen coun­tries still rated triple-A by all three ma­jor credit agen­cies, but S&P Global Rat­ings has re­peat­edly warned it may down­grade should there be any slip­page in the sur­plus dead­line.

“We re­main pes­simistic about the govern­ment’s abil­ity to close ex­ist­ing bud­get deficits and re­turn a bal­anced bud­get by the year end­ing June 30 2021,” it said in De­cem­ber.

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