Australia’s strong credit rating and impressive economic performance over the past decade has been the envy of many economies in the world.
Australia remains one of only nine countries rated AAA with a stable outlook by the three major international credit rating agencies, Moody’s, Standard & Poor’s and Fitch. Moody’s recently confirmed Australia’s sovereign credit rating outlook has remained stable amid global financial uncertainty.
Over the past 10 years, Moody’s also raised the credit ratings of 10 of Australia’s major trading partners in the Asian region to investment grade. Australia’s trade links with these 10 economies are increasingly significant. Together, they account for 64 per cent of our two-way merchandise trade or about A$339 billion in FY2013/14. That’s up from 50 per cent and A$119 billion a decade ago.
Stronger credit ratings and an improved outlook for our major trading partners are important for Australia’s economic growth and stability.
Australia is one of only two countries with a triple-A rating in the Asian region.
Moody’s classifies Australia’s strength as very high, based on the country’s size, economic diversity, the economy’s performance during the past two decades, and favourable long-term growth prospects.
Moody’s also stressed that Australia not only has a significant natural resources sector – including minerals and agriculture – but also well-developed manufacturing and service sectors. In addition, Australia’s economic diversity and financial system strength imply a very low level of event risk.
Standard & Poor’s (S&P) explained that its ratings and outlook on Australia were not immediately affected by the Government’s Mid-year Economic and Fiscal Outlook(MYEFO) for 2014/15. The MYEFO showed that the deficit had blown out to $40.4 billion for 2014/15 from the $29.8 billion predicted in the May budget. The blowout comes amid a 30% collapse in the iron ore price and weaker-than-expected wage growth. S&P stipulated that the main reason for maintaining the rating is Australia’s overall net debt-to-GDP figure.
Australia is one of only seven AAA-rated sovereigns remaining alongside Canada, Switzerland, Sweden, Norway, Denmark and Singapore. The US and Germany lost their AAA rating in 2011, while France followed in 2012, as did the UK and the Netherlands in 2013, and Finland in 2014.
The "triple A" rating is the highest possible rating that can be given to a company or country.