Australia's economic and budget management has been given a strong tick of approval with the reaffirmation of its triple-A credit rating.
Subscribe now for unlimited access.
or signup to continue reading
High commodity prices and inflation, along with strong employment conditions, were narrowing the country's fiscal deficit and slowing borrowing needs, S&P Global Ratings said on Wednesday.
The ratings agency forecast the general government deficit would average about 1.4 per cent of GDP between 2023/24 and 2025/26, ensuring net general government debt remained below 30 per cent of GDP.
"Our ratings on Australia benefit from its strong institutional settings, wealthy economy, and monetary policy flexibility," the agency said.
"Although external indebtedness is high, we expect the current account to be structurally stronger than in the past.
"We affirmed our 'AAA' long-term and 'A-1+' short-term local and foreign currency sovereign credit ratings on Australia."
However, S&P said the ratings could be lowered if there was a material widening in the budget deficit, causing net debt and interest costs to rise.
"This could occur if the economic outlook or commodity prices weakened relative to our expectations, causing fiscal outcomes to materially underperform our forecasts."
Real GDP growth was forecast to slow to 0.6 per cent in 2023/24 as interest rate cuts kicked in and unemployment rose from a historically low base.
The Labor government's final budget outcome to be delivered later this month is expected to show the first surplus in 15 years.
"Our responsible budget management means lower deficits, less debt and savings on interest costs," Treasurer Jim Chalmers said.
Australia is one of only nine countries to be rated AAA by all three major credit rating agencies.
Australian Associated Press
