Australia’s Credit Rating Remains AAA

Merely a few months before the anticipated federal election and despite a declined dollar, or an economy struggling to cope with the financial crisis, Australia has retained its triple-A rating from Standard & Poor’s.

According to the ratings agency, Australia’s positive rating is due to a stable public policy, as well as commendable economic resilience. Craig Michaels, an analyst from Standard & Poor’s said that the country has the ability to “absorb large economic and financial shocks, as was demonstrated during the global recession in 2009.”

Standard & Poor’s, however, acknowledges that Australia’s finances have not been stable in the previous years. Although, compared to other governments which received that same rating, its situation is still “more contained” and the agency expects the government will be able to manage its budget and balance with little deficit.

Standard & Poor’s, meanwhile, cautions Australia with its trade dependence with China. “If demand for Australia’s resources were to weaken sharply, this could lead to a range of disorderly dislocations in its economy, including in its labour and property markets. However, while robust demand for its commodities continues – from emerging Asia, and particularly China – we believe Australia’s economic prospects over the forecast period will remain favourable.”
But things are expected to pick up in the next year as economic activity shifts away from the mining sector towards non-mining parts of the economy.

The AAA rating for Australia may likely keep, assuming that, “historically conservative budgetary policies will remain in place, such that fiscal deficits continue to narrow and that the general government debt burden will remain low.”