Moody's puts Australia on notice following election

by Julia Corderoy12 Jul 2016
Global ratings agency Moody’s has put Australia's credit rating on notice due to concerns about the re-elected Turnbull government’s ability to follow through on its economic strategy.

In a note on Monday, Moody’s said: “in particular, indications that under a Coalition government with a split Senate, little agreement can be reached on fiscal consolidation and macroeconomic policy measures would be credit negative”.

However, the ratings agency has decided adopt a wait-and-see approach before it decides whether to downgrade Australia’s credit rating, unlike its counterpart Standard & Poor’s, which placed Australia’s AAA credit rating on a negative outlook last week.

Moody's noted that trends in Australia's credit profile will be determined by whether fiscal objectives are effectively implemented, whether external financing conditions remain favourable, and how evolution of the housing market affects domestic growth and financial conditions.

It did however highlight that the weaker Australian dollar is a positive, alongside historically low interest rates, and predicted wider economic conditions to remain relatively strong.

But according to a report in the Sydney Morning Herald, this will, in part, be based on the continued strong housing market – which is starting to show signs of a slowdown. 

National house prices across the combined capital cities rose just 0.5% in June, according to CoreLogic, following a 1.6% rise in May.