New York, June 12, 2012 -- Moody's Investors Service says that the outlook for Australia's
Aaa foreign and local currency ratings remains stable.
Australia's Aaa ratings are based on four factors: the country's
very high economic strength; very high institutional strength;
very high government financial strength, and very low susceptibility
to event risk.
The conclusions were contained in Moody's annual Credit Analysis
of the Government of Australia.
Economic strength is classified in Moody's rating methodology as
very high, based on the country's economic diversity,
the performance of the economy during the past two decades, relatively
good growth prospects and high per capita income. During the global
financial crisis and recession, Australia, while recording
one quarter of negative GDP growth in the last quarter of 2008,
did not have a recession, as did almost all other Aaa-rated
countries.
The outlook is for some acceleration in the rate of economic growth,
supported by the mining sector. In the next few years, investment
in the mining sector (including LNG, iron ore, and coal) should
remain strong, while private consumption continues to grow at about
3% annually, supported by a relatively strong labor market.
Thus, over the medium term, real GDP should return to near
its level of the two decades before the financial crisis, in the
3.0-3.5% range. The risks to this scenario
are primarily from external factors — global and East Asian growth
and financial market developments (Europe or elsewhere) --
that could affect Australia because of its dependence on external finance.
Moody's assesses Australia's institutional strength as very
high, a classification shared by all Aaa-rated countries,
and reflecting overall governance, rule of law, effective
monetary and regulatory institutions, and transparency. And,
in Australia's case, these features are reinforced by a strong
commitment on the part of the major political parties to sound government
finance and low public debt levels, an important feature for a highly
rated government
In its classification of government financial strength as very high,
Moody's notes that even at its peak, Commonwealth government
and general government debt (including state and local governments) remains
low by global standards, and the 2012-2013 budget forecasts
a renewed downward trend in debt. As a result, the Commonwealth
will continue to have one of the strongest financial positions among Aaa-rated
governments.
The report also notes that as an advanced, diversified economy with
strong, stable political institutions, Australia has very
low susceptibility to event risk. Commodity-price and exchange-rate
volatility affects the economy, but the most important risk remains
the economy's reliance on external capital inflows to finance the
country's high level of investment, lately dominated by the
resource sector, but including residential construction.
As a result of the high investment level, the country has consistently
run current account deficits and built up one of the largest negative
net international investment positions among advanced economies.
Australia contrasts with some other current-account deficit countries
in that it also has a relatively high saving rate, but the level
of investment is even higher.
The link to the report is http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_142921.
***************************************
NOTE TO JOURNALISTS ONLY: For more information, please call
one of our global press information hotlines: New York +1-212-553-0376,
London +44-20-7772-5456, Tokyo +813-5408-4110,
Hong Kong +852-3758-1350, Sydney +61-2-9270-8141,
Mexico City 001-888-779-5833, São Paulo
0800-891-2518, or Buenos Aires 0800-666-3506.
You can also email us at mediarelations@moodys.com or visit our
web site at www.moodys.com.
Steven A. Hess
VP - Senior Credit Officer
Sovereign Risk Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Thomas J Byrne
Senior Vice President - Regional Credit Officer
Sovereign Risk Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's says outlook for Australia's Aaa rating remains stable