Moody's Triple-A Assessment of Australia

Moody’s have just reiterated Australia’s triple-A credit rating and in doing so, have slapped down the economic drongos who keep moaning, bleating and foaming at the mouth about Australia’s temporary budget deficit, the Government’s “addition to tax” and record levels of gross debt.

May they shut up and look at the facts. In doing so, they should give some praise for Australia’s economic and fiscal strength that has been built up over the last 30 years.

In reiterating the triple-A assessment, Moody’s note (I have bolded key points):

• “Australia's Aaa ratings are based on the country's very high economic resiliency, very high government financial strength, and very low susceptibility to event risk.”
• “It also demonstrates strong governance indicators. In particular, the framework for fiscal policy is transparent and has, until now, consistently kept government debt at low levels.”

Critical in Moody’s assessment appears to be:

• “The government's debt rating of Aaa takes into account the aim of maintaining a balanced budget, on average, over the business cycle. It is supported by the very low level of public debt and the country's strong financial system. In comparison to most other Aaa-rated countries, Australia's government financial strength is very high, with very low gross debt that is easily affordable and provides a high degree of fiscal flexibility.”

In terms of the outlook, Moody’s note:

• “The stable ratings outlook is premised on the expectations that the government will maintain its low debt levels and macroeconomic conditions will continue to support fiscal consolidation.”

It’s clear from the comment on negative risks to the outlook, the Moody’s were struggling to find one. It noted:

• “Any trend or event that caused a long-term shift in budget balances to significant deficits and an increasing public debt burden might put downward pressure on the rating. Such trends could include, for example, fiscal costs associated with an aging population. However, since the government has been proactive in addressing this issue through its superannuation policies and proposed reforms to healthcare schemes, Moody's does not anticipate sustained fiscal deterioration over the rating horizon.”

Australians should be delighted and proud with such a glowing report card on the economy. Well done to Treasury, the RBA, Government and the regulators in locking in this World-Best report card on the Australian economy.

For the full report, go to:

http://www.moodys.com/research/Moodys-Disclosures-on-Credit-Ratings-of-Australia-Government-of--PR_234099