(2 June 2017 – Australia) S&P Global Ratings has warned the big banks are undermining Australia's ability to hold on to its prized AAA rating.
The agency’s chief ratings officer Moritz Kraemer highlighted to the national broadcaster, ABC, that Australia's external debt, rather than a housing market bubble or budget repair, as the real factor in recent deliberations over the credit rating.
“Through the banking system, Australia has accumulated a lot of external debt and that's the result of many years of large external current account deficits,” Kraemer said.
“Among the AAA rated — the top notch rated sovereigns, of which there are only 12 left in the world — Australia is the only country with a large external debt.
“Actually I will go further and say it's the only AAA sovereign which has any net external debt. This is a clear outlier and a weakness of the credit profile of the country.”
Australian foreign debt last year pushed past A$1 trillion mark, with most of it racked up by Australia's banks on offshore wholesale credit markets to partly fund the real estate spending spree that has sent property prices surging in Sydney, Melbourne and Brisbane.
Given Australia was one of the developed world's most trade exposed nations — with most trade with just one country — Kraemer said it needed to be prepared for downside shocks, such as a hard-landing in China.