From Phil Bayley at DCM Review:
The Federal government released its 2017-18 budget on Tuesday night, which despite the numerous disclosures leaked/released prior to budget night, was widely lauded as being conservative, credible and responsible, at least initially. This time around the government changed tack from making budget cuts that could not pass the Senate, to increasing taxes and introducing levies, most of which should be passed.
It was widely reported on Wednesday morning that two ratings agencies, Fitch Ratings and Moody’s Investors Service had already affirmed the triple A ratings they assign to Australia, and it was implied that S&P Global Ratings was being a laggard. It is true that S&P had made no comment.
S&P has a negative outlook on the ‘AAA’ rating it assigns to Australia. And it is S&P that has made the most noise about the risk of the ‘AAA’ rating being lost if the government can’t find a credible approach to address budget deficits and increasing debt, both public and private.
Given this, S&P can be expected to take some time to review the latest budget and decide whether or not the government is moving in the right direction with sufficient speed to address S&P’s concerns.
But it is not true that Fitch and Moody’s had affirmed their ratings. Both have a stable outlook on the triple A ratings they assign and both released comments to the effect that no changes were likely to be made to the ratings.
Fitch said it would.. “make an assessment of the broader impact of new policy measures on the economy and housing market, factors we have identified as rating sensitivities in our previous review”.
Moody’s released a more detailed comment but led with, “Taking the budget and our forecasts into account, we assess Australia’s Fiscal Strength as very high, one key support to the government’s Aaa rating and stable outlook.” And went on to say that Australia’s.. “debt burden is in line with the debt burden of other Aaa-rated sovereigns” and “debt affordability is also in line with other Aaa-rated sovereigns”.
On Friday afternoon Fitch affirmed the AAA/Stable/F1+ ratings assigned to Australia. And earlier in the day Moody’s released a seven page report on Australia and the budget, which was supportive of the ‘Aaa/Stable’ rating assigned by Moody’s but did not affirm the rating.
S&P sure taking their time.
