S&P confuses with AAA risk warning
(5 June 2012 – Australia) Over the weekend Standard & Poor’s (S&P) said Australia’s sovereign AAA rating could be at risk if the government turned its plans to return the budget to surplus.
The comment has many economists baffled, pointing out that the level of borrowings are significantly below other top rated countries.
ANZ senior economist Amber Rabinov told The Herald the bank finds the comments surprising.
Even after a string of budget deficits in recent years, Australia’s net debt-to-GDP ratio this financial year is just under 10 per cent, she noted.
‘‘A doubling of this ratio would still leave Australia significantly below the ratios of other AAA countries such as Germany, where debt-to-GDP is close to 50 percent,’’ Rabinov said.
‘‘We consider S&P’s concerns would incorporate several years of budget deficits with the terms of trade falling significantly and investment profile deteriorating rapidly.’’
‘‘Accompanying weak global conditions would likely dictate other AAA ratings would also be at risk, and in such an environment Australia would remain highly-rated relative to other sovereigns,’’ she said.
ANZ senior economist Amber Rabinov told The Herald the bank finds the comments surprising.
Even after a string of budget deficits in recent years, Australia’s net debt-to-GDP ratio this financial year is just under 10 per cent, she noted.
‘‘A doubling of this ratio would still leave Australia significantly below the ratios of other AAA countries such as Germany, where debt-to-GDP is close to 50 percent,’’ Rabinov said.
‘‘We consider S&P’s concerns would incorporate several years of budget deficits with the terms of trade falling significantly and investment profile deteriorating rapidly.’’
‘‘Accompanying weak global conditions would likely dictate other AAA ratings would also be at risk, and in such an environment Australia would remain highly-rated relative to other sovereigns,’’ she said.
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