S&P Upgrades Australia's Sovereign Rating Outlook

S&P raises Australia's budget outlook to stable, reaffirms its AAA credit rating

S&P raises Australia's budget outlook to stable, reaffirms its AAA credit rating

A downgrade to Australia's AAA credit rating is no longer a near-term threat with Standard and Poor's (S&P) revising its outlook from "negative" to "stable" today.

"We also consider the Australian government to have more willingness and ability to raise revenue than most other sovereigns", said S&P.

The credit ratings of the nation was affirmed at "AAA" and the outlook was revised up to "stable" from "negative".

Back in July 2016, S&P pointed to Australia's double-dissolution federal election outcome as a contributing factor in its decision.

The country's labour market has also enjoyed a job surge since early 2017, sending the unemployment rate lower to 5.3 percent from a peak of 6.4 in 2014 percent while the once-booming housing market is slowly cooling amid stricter regulatory lending restrictions.

The slowdown in property prices was also not expected to weigh heavily on consumer spending and the financial system in general, according to the agency's analysts.

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Home prices in Australia have eased every single month since late previous year, a development that policymakers have widely welcomed.

However it said the pressure remains on government supportiveness for Australian 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.

The agency said the big four banks - ANZ, CBA, NAB and Westpac - all maintain a AA rating with a negative outlook.

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.

In the statement S&P Global Ratings said, "A lowering of our sovereign rating on Australia would have resulted in a downgrade of each of the major Australian banks and Cuscal, reflecting the sovereign's diminished capacity to support the institutions in that scenario".

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