Finally, there is some coverage that will make Joe Hockey smile with Moody’s Investor Services, one of the Big Three global credit rating agencies, giving his budget a big tick of approval.
That is important to markets, the banks and the Government because so few countries have a Triple A rating, which helps keep the cost of borrowing low.
It also gives the Treasurer a selling point to reinforce his message that what many consider a harsh budget was necessary.
Moody’s said the budget:
Significantly improves the medium-term outlook for fiscal deficits and government debt… As such, it confirms Australia’s relatively low debt burden compared to other sovereigns and is supportive of the AAA rating.
Moody’s are quite happy with the changes in the Government’s spending and revenue programs and the impact they are having on the size of the budget deficit from just over 3% now to essentially zero by 2017-18. They also highlighted that while debt would peak in 2016-17, it would decline from there.
Steven Hess, Moody’s lead analyst for Australia said:
In our view, these changes in government programs represent a start to addressing long-term budget pressures, partly brought on by an ageing population.
Crucially, in terms of the portrayal of this as a “Budget Emergency” Hess said:
Many other countries face these pressures, but Australia’s relatively good debt position means it is in a better position than some others to deal with them.
Moody’s sees little chance of Australia undershooting the Budget’s growth projections but did highlight the risks that external factors like China pose.
Overall it’s a clean bill of health and Joe Hockey will be pleased.
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