Ratings agency upgrades Aussie debt outlook on budget expectations

Irving Hamilton
September 23, 2018

But it warned any sharp falls could be problematic.

"The stable outlook reflects our expectations that the general government fiscal balance will return to surplus by the early 2020s", the ratings agency said in a statement.

After nearly a decade of deficits, Australia's centre-right government has said it would turn a small budget surplus in 2019/20.

Now that the fiscal position has improved, it's now removed the threat of downgrading Australia's credit rating for the first time in three decades, rejoining the ranks of Moody's and Fitch who both retain a top rating for Australia with a stable outlook.

It expects the strong labour market and relatively robust commodity prices will lead to steady government revenue growth.

The ratings agency also said it expects a continued "orderly unwind" of property prices with no harmful effects on consumer spending or on the financial system.

The deteriorating government finances was one reason S&P had put Australia on a "negative" watch in mid-2016.

Hong Kong's first high-speed rail line opens this weekend - CMW
Lu said passengers suffered a lot, especially in summer, from having to move their luggage with the sun beating down. Zhang said social conditions have improved, and Hong Kong people now have a more favorable outlook on the mainland.

"We now consider this to be a low probability scenario, as reflected in the revision in our outlook on the Australian sovereign to stable from negative".

But today's upgrade suggests, while household debt remains an issue for many, the agency believes Australia's broader economy is in good shape.

It said pressure remains on government supportiveness for Australia's banks.

However, while a near-term downgrade is now highly unlikely, S&P says Australia's rating could come under pressure from a steeper and larger downturn in the housing market. It has kept the outlooks on all four major banks as well as Cuscal and Macquarie Bank Ltd.as negative.

The long-term issuer credit ratings on Macquarie Bank and Cuscal are two notches above their respective SACPs, due to the belief these institutions would also be potential recipients of timely financial support from the Australian government, if required.

But S&P expects to revise the outlook on those to stable in the next two years, if it believes pressures on government supportiveness toward the banking sector have eased.

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