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Australian Treasurer Wayne Swan said Fitch Ratings affirming the nation’s AAA credit rating after a budget review earlier this week is evidence of the economy’s resilience amid difficult global conditions.
Australia sits with six other countries given the top ratings and a stable outlook by Fitch, Standard & Poor’s and Moody’s Investors Service, Swan said today in a statement.
“This coveted trifecta is another ringing endorsement of our nation’s economy, which continues to kick goals against the backdrop of ongoing global headwinds,” Swan said.
The government will tighten health-care spending and scale back family support payments to help deliver an election-year budget surplus. Spending is forecast to be A$363.2 billion compared with a May projection of A$364.2 billion, while the revenue estimate was cut to A$367 billion from $A368.8 billion, the government said in an Oct. 22 midyear review.
Prime Minister Julia Gillard is bidding to end four years of deficits heading into an election year with polls showing she will lose to the opposition Liberal-National coalition. As the government reins in spending, she’s putting the onus on the central bank to further reduce the highest benchmark rate among major developed nations to bolster a slowing economy.
While Fitch yesterday cited Australia’s “high-income developed economy, credible macroeconomic policy framework with scope for policy flexibility, and standards of governance that rang among the world’s strongest,” it said slower growth in China has affected prices of coal and iron ore exports.
Fitch decided in November of last year to upgrade Australia to an AAA credit rating.
“While we are not immune from what happens overseas, we have every reason to be confident about our economy’s prospects well into the future,” Swan said in the statement today.
Lower prices for iron ore and coal have eroded the nation’s terms of trade, a measure of windfall gains from exports that reached a record high last year, making it more difficult for the government to achieve its budget surplus goal.
Australia has managed to avoid recession for the past 21 years as China’s economic expansion fueled sales of commodities. Slower growth in demand this year has weighed on prices, denting projected tax revenues.
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