Australia’s credit rating has been confirmed by one of the major rating organisations, ensuring that mortgage lending can continue at the current record low levels for the foreseeable future.
S&P Global Ratings affirmed the ability of major banks and the government to continue their own borrowing after they revised Australia’s economic status from ‘negative’ to ‘stable’.
The ratings agency said that it expected the national deficit would drop to 2 to 3% of GDP in the coming years, down from as high as 10% in late 2020.
“The government’s policy response and strong economic rebound have reduced downside risks to our economic and fiscal outlook for Australia,” said Anthony Walker, sovereign credit analyst at S&P.
“As a result, we are revising the outlook to stable and affirming our ‘AAA/A-1+’ long- and short-term local and foreign currency ratings. Australia has a strong track record of managing major economic shocks, moderating our concern over its high level of external and household debt.”
It had previously been listed as ‘negative’ during the worst of the lockdowns last year, when S&P judged that Australia was spending too much on pandemic relief. They had expected Australia to go into a significant recession, with budget deficits inevitable.
Australia was the first of all nations with a AAA rating to have their status changed to ‘negative’, and the movement back to ‘stable’ will be seen as a boost ahead of the new bond period which is set to begin at the end of this month.
While areas of Australia, most notably Melbourne, have enduring lengthy and repeated lockdowns, the broader bounce back across the Australian economy seems to have convinced S&P that the nation is on the right economic track going forward.
“While lockdowns drove the Australian economy into a record contraction and the budget into substantial deficit, they also allowed governments to quickly control the outbreak relative to most other countries,” said the report.
“This early success underpins the stronger economic and fiscal recovery than otherwise would have been the case.”