BUDGET 2013: Australia maintains AAA rating


Australia's AAA rating remains unchanged despite the federal government handing down an $18 billion deficit.

The world's two largest ratings agencies have retained Australia's AAA rating due to the nation's low public debt and prudent fiscal policy in the medium term.

In a statement, Moody's said the outlook for Australia remained strong as the projected budget deficits were only a small percentage of GDP.

Although the government budget is now forecast to remain in deficit through the 2014-15 fiscal year, the projected deficits are relatively small as a percentage of GDP," Moody's said.

"As a result, the ratio of government debt to GDP will rise only marginally, and Australia will remain among the few AAA-rated sovereign debt issuers that have low debt levels."

Moody's said Australia's main vulnerability was its dependence on external capital markets for finance, but it was not a major risk to the government's financial position.

For the next two years the current account deficit is projected to be smaller than the average of the past couple of decades, which lessened the vulnerability.

Moody's Investors Service senior vice president Steven Hess said although Australia's budget was now forecast to remain in deficit through to 2014/15, the nation's level of debt was still low.

He said Australia's gross national debt was about 20 per cent of GDP, compared to over 80 per cent for the US and Germany.

"Australian government debt levels are low compared to other AAA-rated countries and are not going to rise very much as a percentage of GDP," he said.

Standard & Poor's also maintained Australia's AAA sovereign rating despite the revised budgetary projections, as the nation's public debt was low.

"While the 2014 budget represents some slippage in achieving the government's strategy of returning the budget to surplus following moderate deficits in recent years, the government continues to demonstrate a commitment to prudent fiscal policy over the medium term, in our view," the ratings agency said in a statement

The agency said it considered the Australian government's fiscal position to be a key ratings strength.

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The IMF and Rating agencies(and most commentators in Australia) have not yet worked out the Combined "States +Commonwealth" financial situation including liabilities and Debt, and even tax take ratio combined, specially in IMF and even some OECD stats. Australia ratios are different from US ratios where the States are totally representatives for their own taxes and their own debt and liabilities. The rating agencies evaluation is based on an incoming mining revenue with and indirect feed into the Australian economy that will only gradually slow down. Hence our position is deteriorating but slowly, nothing to rejoyce about!
Look like the States liabilities are hard to calculate given the PPP and privatisations, without going in the assets – liabilities game, that takes a truckload of auditors to go through, but from a constitutional viewpoint the commonwealth is liable, hopefully we may never found ourselves with another legal shamble on this matter, such as the one with the advise on Derivatives before the GFC which the Rating agencies are still going through. So are we an as good AAA as Lehman Brother? Who cares, lending rates are at Zero and the printing press at full speed to buy us.