Credit where it's due for our economy
Standard & Poor's said on Monday it expected the new government to pursue a "broadly similar" strategy to the old one.
"After six years in opposition, the centre-right Liberal-National Party Coalition won the right to form government. We expect the new government to pursue a broadly similar fiscal strategy to the previous government, targeting narrowing budget deficits over time," it said in a statement.
"In line with the Coalition's pre-election announcements, we expect new spending measures - such as infrastructure projects and a new paid parental leave scheme - to be broadly offset by savings measures, particularly cuts to the bureaucracy and unwinding of recent policies related to household payments."
Moody's Investors Service expected no change to Australia's budget framework.
"Moody's AAA rating of the Australian government is based on the long-standing fiscal policy framework that results in balanced budgets or surpluses and low government debt in relation to other highly rated sovereigns," it said. "We believe that the return to power of a Coalition government will not result in changes to the framework."
Fitch Ratings thought the Coalition would "remain on track" to deliver a modest budget surplus in 2017, "broadly in line with the road map set by the outgoing Labor government".
"This reflects the absence of deep ideological divides between the two main parties on core aspects of fiscal management, notwithstanding political differences on a few taxation policies," it said.
"Fiscal discipline is enshrined in the Charter of Budget Honesty Act, enacted in 1998. This has forged a durable social consensus on maintaining a balanced budget through the economic cycle."
All three reconfirmed their AAA credit ratings for Australia.
Standard & Poor's said Australia's budget policies had been "conservative", leading to "declining budget deficits and general government debt remaining low". Moody's said the current string of "modest deficits" stemmed from the global financial crisis. Economic growth would remain "somewhat subdued" during 2013, picking up in 2014.
Fitch said growth had begun to slow in the wake of a "topping out" of mining investment. Sustaining GDP growth at its potential rate of 3 per cent could prove "challenging".
Peter Martin is economics correspondent.
Frequently Asked Questions about this Article…
Standard & Poor’s, Moody’s and Fitch all signaled continuity: S&P expected the new Coalition government to pursue a “broadly similar” fiscal strategy to the previous government, Moody’s saw no change to Australia’s budget framework, and Fitch said the Coalition would likely remain on track to deliver a modest surplus.
No. All three agencies — Standard & Poor’s, Moody’s and Fitch — reconfirmed Australia’s AAA sovereign credit rating in the coverage cited.
No. The article notes that despite political rhetoric about a budget emergency or a large black hole, the credit rating agencies did not accept those claims and instead emphasized continuity in fiscal management and the strength of Australia’s credit profile.
Moody’s pointed to Australia’s long-standing fiscal policy framework that has produced balanced budgets or surpluses and relatively low government debt compared with other highly rated sovereigns, and said a return to Coalition government was unlikely to change that framework.
Standard & Poor’s described Australia’s budget policies as “conservative,” leading to declining budget deficits and low general government debt. Moody’s noted a run of modest deficits that stemmed from the global financial crisis.
The agencies expected growth to be somewhat subdued in 2013 with a pickup in 2014. Fitch warned that sustaining GDP growth at its potential rate of around 3% could be challenging.
Fitch said growth had begun to slow following a ‘topping out’ of mining investment, implying that the wind-down of the mining investment cycle could make it harder to sustain higher GDP growth without other sources of demand.
S&P expected the Coalition to introduce spending measures such as infrastructure projects and a new paid parental leave scheme, but said these would likely be broadly offset by savings measures — notably cuts to bureaucracy and unwinding recent household payment policies — so the overall fiscal stance would remain similar.
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