From The Australian following yesterday afternoon’s AAA panic:
S&P analyst Craig Michaels told The Australian “our view hasn’t changed” and said that the company continued to have a stable outlook on Australia’s AAA rating, with no significant risk to that outlook on current trends.
“We wouldn’t be surprised to see some material revenue writedowns in the May budget, given what we’ve seen in commodity prices,” he said.
“We still think there’s a political consensus for governments to run finances prudently, and a consensus on both sides of politics that surpluses are a good objective. We don’t think that’s fundamentally changed.”
“There’s still a buffer there, but that’s one factor we’ll be looking at,” Mr Michaels said.
The presser included a reassurance that the rating was unlikely to shift in the next two years. That adheres to my own most likely timetable.
A modest $140 billion in spare debt capacity sits between Australia and the 30% net debt to GDP cap that sustains the AAA rating. If commodity prices fall to where I think they will then much of that will evaporate just on refinancing, let alone the next global shock:
In case you’re wondering, the only reason that we have this incredibly low ceiling on our public debt is because of the massive private debt that is mostly borrowed offshore and is a contingent liability for the public purse.
Given how inequitable this is to those who aren’t a part of the public asset quango including our unborn children, let alone how corrupting it is for our democracy and market transparency, let’s make it official. I suggest that we adopt a new “house price support tax” of 1% of all property values nation wide per annum.
With a housing stock worth $5 trillion that would raise $50 billion each year, cure the budget deficit, and free the rest of the nation from dragging around this giant ball and chain.