Australia holds onto triple-A credit rating
The credit rating agency issued the annual rating despite a recent fall in the country's terms of trade and a steep decline in the dollar in recent months.
The dollar brushed US90¢ in recent weeks after spending the past couple of years trading near parity with the US dollar.
The stable rating has been maintained even after some deterioration in the country's public finances.
Australia remains one of just eight countries to have a triple-A rating from all three major credit-rating firms.
The main reasons for Standard & Poor's vote of confidence include Australia's public policy stability, economic resilience, and flexible fiscal and monetary policy.
A credit analyst from Standard & Poor's, Craig Michaels, said Australia had a "strong ability" to absorb large economic and financial shocks, "as was demonstrated during the global recession in 2009".
"[However], moderating these strengths are Australia's high external imbalances, dependence on commodity exports, and high household debt."
The ratings agency notes Australia's public finances have "worsened" in the past few years but the deterioration has been "more contained" than for many triple-A rated peers.
It also said it expects the government sector's budget balance to post "relatively small and declining deficits as a share of GDP". It expects the federal budget to be "broadly in balance" by 2016.
Economic conditions have softened in Australia in the last 12 months as mining investment growth slowed. The agency expects economic growth for the year to June 30 to slow to 2.6 per cent, down from 3.4 per cent in fiscal year 2012.
But things are expected to pick up in the next year as economic activity shifts away from the mining sector towards non-mining parts of the economy.
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Standard & Poor's reaffirmed Australia's triple-A credit rating with a stable outlook, citing public policy stability, economic resilience and flexible fiscal and monetary policy as the main reasons for its vote of confidence.
Australia is one of just eight countries to hold a triple-A rating from all three major credit‑rating firms, making that status relatively rare globally.
S&P pointed to several moderating risks: high external imbalances, dependence on commodity exports, and high household debt. It also noted that public finances have worsened in recent years, though the deterioration has been more contained than for many triple‑A peers.
The agency expects the government sector's budget balance to record relatively small and declining deficits as a share of GDP and said it expects the federal budget to be broadly in balance by 2016.
S&P expects economic growth for the year to June 30 to slow to 2.6% (down from 3.4% in fiscal 2012) but said activity should pick up the following year as growth shifts away from the mining sector toward non‑mining parts of the economy.
Although the report noted a recent fall in the terms of trade and a steep decline in the Australian dollar (it brushed around US90¢ after trading near parity), S&P maintained the triple‑A rating despite those developments.
S&P analyst Craig Michaels said Australia demonstrated a strong ability to absorb large economic and financial shocks, citing the country's performance during the global recession in 2009 as an example of that resilience.
The reaffirmation signals that Standard & Poor's views Australia as having stable public policy, economic resilience and flexible policy settings—factors many investors watch when assessing macro risk. At the same time, S&P flagged risks such as high household debt and reliance on commodity exports that investors should keep in mind.
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