Treasurer Josh Frydenberg says the decision by a global credit rating agency to lift Australia’s credit outlook to stable is a resounding expression of confidence in the Morrison government’s economic management.
Standard & Poor’s announced on Monday it was lifting Australia’s outlook to stable from negative, indicating the country’s top-tier AAA rating is safe.
S&P said the improved outlook reflects its expectations that government budget deficits will narrow in line with its own forecasts.
“We expect the budget to be supported by steady revenue growth, aided by robust commodity prices and expenditure restraint,” the agency said.
“We believe Australia’s external accounts are likely to remain stronger than in the past and be resilient during potential crises.”
It said Australia has a strong track record of managing major economic shocks, moderating the agency’s concern over the nation’s high level of external and household debt.
Being on a negative outlook meant Australia was at risk of losing its AAA status in the next two years, potentially raising the cost of borrowing for government, big business and banks in overseas markets, which in turn could be passed on to consumers.
S&P noted Australia had fully recovered lost output caused by the COVID-19 pandemic, by the end of March.
Last week’s national accounts saw the economy grow 1.8 per cent in the March quarter to an annual rate of 1.1 per cent, confirming the nation had completed the recovery from last year’s recession.
“This is a feat no major advanced economy has achieved and is in contrast to Japan, France, Germany and the UK who all contracted in the March quarter 2021 while the euro area is back in recession,” Mr Frydenberg said.
“Australia remains one of just nine countries to hold a AAA credit rating from the three major rating agencies.”