Moody’s has affirmed Australia’s top credit rating based on the nation’s strong economy, track record and long-term growth prospects.
The ratings agency today said its outlook for Australia’s AAA foreign and local currency ratings remained stable.
Despite a slightly below-median income per capita, Australia’s rate of economic expansion has outpaced all its peers, except Singapore.
Australia has avoided a recession in the past six years, thanks to the Government’s ability to implement a stimulus program, including tax cuts and infrastructure spending.
In recent years, Australia’s mining boom saw the sector directly accounting for 10% of GDP and 3% of employment but driving a total of 16-17% of economic activity and 8% of employment thanks to its effect on other sectors.
Moody’s expects Australia’s moderate growth to continue despite a ‘gradual change in the structure of economy’, away from the mining sector and towards housing and exports.
Moody’s expects Australia’s economy to grow 2.5-3.5% in ‘the next few years’.
Australia’s debt is low compared to other AAA-rated nations and is expected to return to surplus in 2015-16.
According to Moody’s, upcoming elections and a potential change in government will be unlikely to change Australia’s overall fiscal position, with both parties essentially committed to maintaining a low level of government debt over time.
To date, Australia has been highly reliant on international investments but Moody’s expects this reliance to decrease over time, thanks to falling government debt levels, the end of the mining boom, and more household saving.
Moody’s says Australia’s reliance on foreign currency is its most important risk, but it says the nation’s corporate, banking and government sectors have managed commodity price and exchange rate volatility well.
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