This report does not constitute a rating action.
Credit Highlights
| Overview | |
|---|---|
| Institutional and economic profile | Flexibility and performance profile |
| Australian governments have demonstrated a willingness and ability to implement reforms to sustain economic growth and ensure sustainable public finances over economic cycles. | Australia's public finances are recovering after the COVID-19 shock. The general government deficit will narrow substantially as stimulus measures finish. Net general government debt will remain higher than in the past. |
| Australia’s economy is recovering strongly after the pandemic. The economy is high income and diversified, which support the rating. | Monetary policy and a flexible exchange-rate regime remain key strengths. The central bank supports market function and a low interest-rate environment.Australia's external accounts have proven resilient during another crisis, despite a high level of external and household indebtedness. |
Australia's economy is recovering after another contraction caused by the COVID-19 pandemic and restrictions in the September 2021 quarter. Reflecting this recovery and the winding up of associated fiscal stimulus, we forecast the change in net general government debt will narrow to about 3.5% of GDP in fiscal years 2022 and 2025; down from its peak of 9.5% of GDP in 2021. Net general government debt will remain modest as it doubles to about 35.5% of GDP by 2025. Servicing costs will remain manageable due to the low interest-rate environment. The pandemic dealt Australia a severe economic and fiscal shock in 2020.
Supporting our ratings are Australia's strong institutions, which are conducive to swift and decisive policy making, credible monetary policy, and a floating exchange-rate regime. These strengths have ensured Australia's economy and external vulnerabilities, while high and susceptible to commodity demand, remained resilient throughout the pandemic.
Outlook
The stable outlook reflects our expectations that the general government fiscal deficits will narrow. We expect the budget to be supported by steady revenue growth, aided by commodity prices and expenditure restraint. We believe Australia's external accounts are likely to remain stronger than in the past and be resilient during potential crises.
Downside scenario
We could lower our ratings if we believe the general government deficit is unlikely to narrow over the next two years. This could occur if the economy underperforms our expectations, there are prolonged lockdowns, the government implements substantial additional fiscal stimuli because of large unforeseen outbreaks, or commodity prices fall much faster and further than we expect. A sharp fall in commodity prices could reverse recent gains in Australia's external accounts.
Australia's weak external position means that its other sovereign credit factors, including the fiscal factors, need to be strong to keep the sovereign rating at the highest level on our scale. A stronger fiscal position would also be a strong buffer to absorb the consequences of an abrupt weakening of the housing market and the vulnerabilities such an event could bring to financial stability.
Rationale
Institutional and economic profile: High-income, diversify and resilient economy, along with strong institutions are key credit strengths
Australia's economy is recovering after a sharp contraction in the September 2021 quarter caused by a second outbreak of COVID-19 in Australia's two most populated states--New South Wales and Victoria. We expect economic growth returned in the December quarter as governments eased restrictions in response to the improving vaccination rate. Unemployment recovered quickly to 4.2% in December 2021, a level that hasn’t been achieved regularly since 2008.
We forecast the economy will expand 2.5% in fiscal 2022 and 3.9% the following year. Growth will be supported by government spending, accommodative monetary policy, and consumption. Downside risks persist, however, with the number of locally recorded COVID-19 cases rising rapidly in recent weeks. While we do not believe this will halt the recovery, it could slow it as consumer and business confidence dampens, consumers pull back on discretionary spending, and businesses delay investment decisions. Further, supply chain constraints, including labor shortages, are rising, though wage growth remains modest.
Like most of its peers, Australia's economy was hit hard by the global pandemic, which forced governments to close large parts of their economies to contain outbreaks. GDP contracted by a record 6.8% in the June 2020 quarter, resulting in the country's first recession since the early 1990s. Thanks to substantial fiscal stimulus, the economy by March 31, 2021, had recovered lost output caused by the pandemic. Australia's economy contracted 2.4% in calendar 2020. This was the 11th strongest performance out of the 72 sovereigns we rate in the investment-grade category.
Strong travel restrictions limiting migration will continue to inhibit Australia’s population and economic growth in the near term. We expect population growth of 0.4% in 2022 after barely remaining positive at just 0.1% in 2021. Net migration has turned negative for the first time since 1946 and was the weakest outcome since World War 1. Migration is important for Australia and has contributed about 60% of Australia's 1.6% annual population growth since 2005. We believe migration inflows will rebound strongly once borders open and there is more certainty around travel restrictions. Australia's economy remains structurally wealthy and diversified, with a high GDP per capita of about US$63,000 in fiscal 2022.
Australia's high level of wealth derives from strong institutional settings and policy making as well as decades of economic reform, which have facilitated the country's flexible labor and product markets. Australian governments have demonstrated a willingness to implement reforms to sustain economic growth and ensure sustainable public finances and have a strong track record from managing past economic and financial crises. We don’t expect this to change after the upcoming Commonwealth election, which is due by May 2022. Importantly, there is strong bipartisan support in Parliament during economic and financial crises. Institutions are stable and provide checks and balances to power, there is strong respect for the rule of law, and a free flow of information and open public debate of policy issues.
The recent rapid spread of the omicron variant highlights the inherent uncertainties of the pandemic as well as the importance and benefits of vaccines. While the risk of new, more severe variants displacing omicron and evading existing immunity cannot be ruled out, our current base case assumes that existing vaccines can continue to provide significant protection against severe illness. Furthermore, many governments, businesses, and households around the world are tailoring policies to limit the adverse economic impact of recurring COVID-19 waves. Consequently, we do not expect a repeat of the sharp global economic contraction of second-quarter 2020. Meanwhile, we continue to assess how well each issuer adapts to new waves in its geography or industry.
Flexibility and performance profile: Australia's public finances recovering after COVID-19 shock; external accounts resilient despite being key vulnerability
We believe Australia's fiscal accounts are improving. We forecast the general government deficit, including the Commonwealth and subnational governments, will narrow to an average of about 3.3% of GDP between fiscal years 2023 and 2025. This expected improvement is a key supporting factor of our 'AAA' ratings because it will reduce the government’s annual borrowing needs. We forecast the change in net general government debt will be about 3% of GDP in fiscal years 2023 and 2025 after accounting for changes in the value of liquid assets.
We estimate the general government deficit peaked at 9.2% of GDP in 2021 as multiple COVID-19 outbreaks and subsequent government-imposed lockdowns wreaked havoc on Australia’s economy and public balance sheets. While lockdowns drastically hit the economy and government budgets, they also allowed governments to quickly control outbreaks relative to most other countries. This underpinned the stronger economic and fiscal recovery than otherwise would have been the case.
The government's strong balance sheet provided it headroom at the 'AAA' rating level to absorb the cost of the pandemic. Australia's budget improved in recent years on the back of tight fiscal discipline, strong labor market conditions, and high commodity prices. The general government budget was effectively balanced after achieving deficits of just 0.7% of GDP in 2019 and 1% in 2018.
The pace of the economic recovery and exceptionally strong demand for key commodity exports--namely iron ore--provided a timely boost to government revenues such as company and income taxes, the goods and services tax, and conveyance duties before the delta outbreak in the September 2021 quarter. We expect key revenue lines will outperform the central and state governments' own forecasts. The iron ore price, despite retreating from all-time highs, remains relatively high and coal prices have picked up in the first half of fiscal 2022 (see "Metal Price Assumptions: Choppy Markets Drive Erratic Moves," published Oct. 12, 2021). For the first five months of fiscal 2022, the Commonwealth’s headline cash deficit of A$38.6 billion was substantially lower than its estimates in the 2021-2022 Budget despite lockdowns. During the same period in fiscal 2021, the headline cash deficit was A$112.4 billion.
Strong employment growth and the temporary nature of COVID-related stimulus meanwhile will help return general government expenditures to less than 37% of GDP in 2024, even accounting for additional spending on aged care and the national disability insurance scheme. Expenditure peaked at more than 44% at the height of the crisis and averaged about 36% of GDP during the preceding decade.
We do not expect to see a large increase in spending initiatives that would substantially weaken fiscal accounts in the next budget or in the lead up to the Commonwealth election. Nor do we expect further lockdowns to derail our expected fiscal recovery at the general government level by weighing on projected revenue growth or resulting in material fiscal stimulus. This is based on the government's fiscal strategy, which involves driving the unemployment rate back to its prepandemic level of about 5% and securing a sustained economic recovery. It will then focus on stabilizing and reducing government debt relative to GDP.
Supporting our assessment of Australia's fiscal position is our view that it has displayed more willingness than its peers to raise revenues and contain expenditures. For example, revenue as a share of GDP has increased since the 2008-2009 financial crisis and expenditures were flat as a share of GDP before the pandemic.
While the fiscal balance will narrow, the pandemic will have a lasting effect on the level of public debt in Australia. We forecast net general government debt will double since the start of the outbreak to reach about 35.5% of GDP in 2025. The low interest-rate environment meanwhile will ensure servicing costs remain manageable, at about 4% of general government revenues until 2025.
We expect solid growth in house prices over the next few years. National prices rose about 20% in 2021 and transaction volumes are growing after a period of softness at the height of the pandemic. We believe growth in house prices will be aided by record-low interest rates, supply constraints and commencements of new supply taking time to recover, and migration returning when borders reopen. House prices consequently are likely to remain high relative to incomes. Nevertheless, we note that the rise in prices follows an orderly unwind between 2017 and 2019. We expect the regulators will take timely action to mitigate risks to financial system stability from a house price resurgence and high household debt.
We expect bank credit to nongovernment residents to remain high and be steady at about 170% of GDP, including interbank lending. An abrupt disruption in the property market, which is not our expectation, could lead to vulnerabilities in the financial sector and fiscal and economic stability.
We consider Australia's banking system to be strong. It ranks in the top quartile of banking systems that we rate globally. Along with the high-income Australian economy, this reflects the low risk appetites of the major banks, which dominate the industry, and is supported by conservative and largely effective regulation. We believe bank credit losses peaked in 2020, reflecting the damage inflicted by COVID-19. We forecast credit losses to remain close to historically low prepandemic levels. We also consider that only a small proportion of borrowers will face distress due to the reduction in fiscal support from the government and the recent conclusion of loan moratoriums. However, high house prices and private-sector debt continue to pose risks to the banking sector.
Australia's economy is resilient but remains vulnerable to major shifts in international capital flows. While these vulnerabilities are a structural feature of Australia's economic landscape, they are improving and haven't negatively affected the economy or financial system during several recent crises. We believe this is because of Australia's flexible economy, sound investment prospects, foreign investors' confidence in Australia's rule of law, the high creditworthiness of its banking system, and strong institutional performance in addressing major economic shocks. Australia's external debt is mostly generated by the private sector and reflects the productive investment opportunities available in Australia.
We believe the economy carries a high level of net external debt, at 270% of current account receipts (CARs) in 2022, and a large stock of short-term external debt. The stock of short-term external debt, which is mostly bank debt, has fallen to about 150% of CARs from more than 200% in fiscal 2016. Additionally, we expect external liabilities to decline toward 200% of CARs in 2025, given the current account position, the Reserve Bank of Australia's (RBA; central bank) Term Funding Facility, and strong deposit growth. The current account is in surplus for the first time since 1974 and should be substantially better than in the past. We expect the current account to revert to a small deficit after hitting a surplus of 13% of CARs in 2021. The current account will weaken because of lower iron ore prices, imports picking up, and eventually a weakening of the service account once borders fully reopen. Nevertheless, it should be much better than the current account deficit of 20% of CARs the country has averaged during the past two decades.
We expect Australia's external borrowers to maintain easy access to foreign funding. The RBA has maintained a freely floating exchange-rate regime since 1983. The Australian dollar represents about 1.7% of allocated international reserves as of the September 2021 quarter, and the currency is represented in a comparable percentage of spot foreign-exchange transactions. Australia's domestic bond market is deep and although external borrowing is high, it is mostly denominated in the nation's own currency or hedged.
Australia has a high degree of monetary credibility via the independent RBA. This is helping the country to temper major economic shocks such as the current COVID-19 pandemic as it did during the 2008-2009 global financial crisis. We believe the inflation outlook will be subdued and within the RBA’s 2%-3% target over the next few years. The RBA struggled to achieve its inflation target in years leading up to the pandemic as unemployment and underemployment remained stubbornly high. The RBA responded to the COIVD-19 pandemic in March 2020 by cutting the overnight cash rate to 0.1%. It also started targeting a three-year Australian Government Securities (AGS) yield of 0.1% by purchasing bonds in the secondary market. As of Dec. 31, 2021, the RBA held about A$272 billion of AGS and $A65 billion of state securities. This is helping facilitate the smooth functioning of Australia's bond market.
| Australia--Selected Indicators | ||||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022bc | 2023bc | 2024bc | 2025bc | |||||||||||||
| Economic indicators (%) | ||||||||||||||||||||||
| Nominal GDP (bil. A$) | 1,657.8 | 1,759.0 | 1,842.5 | 1,945.4 | 1,980.1 | 2,066.6 | 2,202.1 | 2,329.7 | 2,420.5 | 2,514.9 | ||||||||||||
| Nominal GDP (bil. $) | 1,206.8 | 1,326.6 | 1,428.2 | 1,391.3 | 1,327.4 | 1,542.4 | 1,626.8 | 1,724.4 | 1,800.6 | 1,870.8 | ||||||||||||
| GDP per capita (000s $) | 49.9 | 53.9 | 57.2 | 54.9 | 51.7 | 59.9 | 62.9 | 65.7 | 67.6 | 69.3 | ||||||||||||
| Real GDP growth | 2.7 | 2.3 | 2.9 | 2.1 | 0.0 | 1.5 | 2.1 | 4.3 | 2.4 | 2.4 | ||||||||||||
| Real GDP per capita growth | 1.2 | 0.6 | 1.3 | 0.6 | (1.3) | 1.3 | 1.6 | 2.8 | 0.9 | 0.9 | ||||||||||||
| Real investment growth | (3.6) | (0.0) | 4.8 | (1.3) | (2.5) | 2.7 | 5.4 | 4.5 | 2.7 | 2.7 | ||||||||||||
| Investment/GDP | 25.4 | 24.1 | 24.6 | 23.3 | 22.3 | 22.5 | 23.4 | 23.8 | 23.9 | 24.1 | ||||||||||||
| Savings/GDP | 20.8 | 21.8 | 21.7 | 22.5 | 24.1 | 25.9 | 23.7 | 23.7 | 23.5 | 23.6 | ||||||||||||
| Exports/GDP | 19.2 | 21.3 | 21.9 | 24.2 | 23.9 | 22.2 | 19.9 | 19.9 | 20.0 | 20.1 | ||||||||||||
| Real exports growth | 6.4 | 5.5 | 4.1 | 4.0 | (1.7) | (8.3) | 0.3 | 3.8 | 2.4 | 2.4 | ||||||||||||
| Unemployment rate | 5.7 | 5.6 | 5.3 | 5.2 | 7.4 | 4.9 | 4.6 | 4.4 | 4.3 | 4.3 | ||||||||||||
| External indicators (%) | ||||||||||||||||||||||
| Current account balance/GDP | (4.6) | (2.3) | (2.8) | (0.8) | 1.9 | 3.4 | 0.3 | (0.1) | (0.5) | (0.5) | ||||||||||||
| Current account balance/CARs | (20.2) | (9.1) | (11.1) | (2.7) | 6.7 | 13.1 | 1.5 | (0.2) | (2.0) | (2.2) | ||||||||||||
| CARs/GDP | 22.9 | 24.9 | 25.7 | 28.4 | 27.9 | 25.9 | 23.4 | 23.1 | 23.0 | 23.0 | ||||||||||||
| Trade balance/GDP | (1.6) | 0.8 | 0.7 | 2.7 | 3.7 | 3.7 | 1.6 | 1.4 | 1.4 | 1.3 | ||||||||||||
| Net FDI/GDP | 3.7 | 3.6 | 3.5 | 3.4 | 1.5 | 0.4 | 3.0 | 3.0 | 3.0 | 3.0 | ||||||||||||
| Net portfolio equity inflow/GDP | (0.3) | 0.9 | (3.0) | (3.2) | 1.1 | (6.4) | (2.0) | (2.0) | (2.0) | (2.0) | ||||||||||||
| Gross external financing needs/CARs plus usable reserves | 274.3 | 250.8 | 232.4 | 221.0 | 216.4 | 215.8 | 229.3 | 223.3 | 217.3 | 210.7 | ||||||||||||
| Narrow net external debt/CARs | 320.3 | 273.6 | 260.1 | 247.1 | 261.3 | 274.7 | 269.5 | 238.1 | 216.1 | 203.1 | ||||||||||||
| Narrow net external debt/CAPs | 266.4 | 250.7 | 234.2 | 240.6 | 279.9 | 316.0 | 273.5 | 237.6 | 211.8 | 198.6 | ||||||||||||
| Net external liabilities/CARs | 275.4 | 228.7 | 206.1 | 185.7 | 186.1 | 174.6 | 187.5 | 183.6 | 181.2 | 178.4 | ||||||||||||
| Net external liabilities/CAPs | 229.0 | 209.6 | 185.6 | 180.8 | 199.3 | 200.8 | 190.3 | 183.2 | 177.6 | 174.5 | ||||||||||||
| Short-term external debt by remaining maturity/CARs | 205.3 | 180.9 | 162.3 | 151.4 | 155.7 | 153.1 | 160.2 | 150.5 | 140.9 | 132.3 | ||||||||||||
| Usable reserves/CAPs (months) | 1.9 | 1.7 | 1.9 | 1.8 | 1.9 | 1.6 | 1.6 | 1.5 | 1.4 | 1.3 | ||||||||||||
| Usable reserves (Mil. $) | 51,709.5 | 64,672.8 | 59,189.4 | 55,987.1 | 44,813.3 | 48,715.9 | 48,715.9 | 48,715.9 | 48,715.9 | 48,715.9 | ||||||||||||
| Fiscal indicators (general government %) | ||||||||||||||||||||||
| Balance/GDP | (2.4) | (2.1) | (1.0) | (0.7) | (6.8) | (9.2) | (5.9) | (3.9) | (3.3) | (2.9) | ||||||||||||
| Change in net debt/GDP | 2.2 | 0.0 | 2.7 | (0.6) | 7.5 | 9.5 | 4.9 | 3.6 | 2.6 | 2.8 | ||||||||||||
| Primary balance/GDP | (1.0) | (0.8) | 0.3 | 0.7 | (5.6) | (7.9) | (4.5) | (2.6) | (1.9) | (1.5) | ||||||||||||
| Revenue/GDP | 34.7 | 34.3 | 35.2 | 35.6 | 33.7 | 34.8 | 34.7 | 33.4 | 33.5 | 33.8 | ||||||||||||
| Expenditures/GDP | 37.0 | 36.4 | 36.3 | 36.3 | 40.5 | 44.0 | 40.5 | 37.3 | 36.8 | 36.7 | ||||||||||||
| Interest/revenues | 4.0 | 3.7 | 3.7 | 3.8 | 3.6 | 3.8 | 3.8 | 3.8 | 4.1 | 4.2 | ||||||||||||
| Debt/GDP | 33.9 | 37.1 | 37.6 | 36.1 | 45.3 | 52.9 | 55.9 | 57.4 | 58.7 | 59.9 | ||||||||||||
| Debt/revenues | 97.8 | 108.1 | 106.8 | 101.4 | 134.6 | 152.2 | 161.3 | 171.7 | 175.5 | 177.1 | ||||||||||||
| Net debt/GDP | 10.9 | 10.4 | 12.6 | 11.4 | 18.7 | 27.4 | 30.6 | 32.6 | 34.0 | 35.5 | ||||||||||||
| Liquid assets/GDP | 23.0 | 26.7 | 25.0 | 24.7 | 26.7 | 25.5 | 25.3 | 24.8 | 24.8 | 24.4 | ||||||||||||
| Monetary indicators (%) | ||||||||||||||||||||||
| CPI growth | 1.4 | 1.7 | 1.9 | 1.7 | 1.3 | 1.6 | 2.9 | 2.6 | 2.2 | 2.2 | ||||||||||||
| GDP deflator growth | (0.6) | 3.7 | 1.8 | 3.4 | 1.8 | 2.8 | 4.3 | 1.5 | 1.5 | 1.5 | ||||||||||||
| Exchange rate, year-end (A$/$) | 1.4 | 1.3 | 1.4 | 1.5 | 1.5 | 1.3 | 1.4 | 1.4 | 1.3 | 1.3 | ||||||||||||
| Banks' claims on resident non-gov't sector growth | 7.3 | 5.5 | 4.1 | 3.7 | 16.6 | 0.7 | 7.0 | 5.0 | 5.0 | 5.0 | ||||||||||||
| Banks' claims on resident non-gov't sector/GDP | 158.3 | 157.4 | 156.4 | 153.6 | 175.9 | 169.6 | 170.3 | 169.1 | 170.9 | 172.7 | ||||||||||||
| Foreign currency share of claims by banks on residents | 4.5 | 3.7 | 4.6 | 4.2 | 3.7 | 3.4 | 4.32 | 4.32 | 4.32 | 4.32 | ||||||||||||
| Foreign currency share of residents' bank deposits | 3.6 | 3.9 | 4.6 | 4.6 | 4.5 | 3.6 | 3.5 | 3.5 | 3.50 | 3.50 | ||||||||||||
| Real effective exchange rate growth | (7.9) | 3.6 | (1.1) | (5.1) | (4.7) | 6.3 | N/A | N/A | N/A | N/A | ||||||||||||
| Sources: Australian Bureau of Statistics (Economic Indicators), Reserve Bank of Australia, International Monetary Fund (Monetary Indicators), Australian Bureau of Statistics, Australian Office of Financial Management, International Monetary Fund (Fiscal Indicators), Australian Bureau of Statistics (External Indicators). | ||||||||||||||||||||||
| Adjustments: None | ||||||||||||||||||||||
| Definitions: Savings is defined as investment plus the current account surplus (deficit). Investment is defined as expenditure on capital goods, including plant, equipment, and housing, plus the change in inventories. Banks are other depository corporations other than the central bank, whose liabilities are included in the national definition of broad money. Gross external financing needs are defined as current account payments plus short-term external debt at the end of the prior year plus nonresident deposits at the end of the prior year plus long-term external debt maturing within the year. Narrow net external debt is defined as the stock of foreign and local currency public- and private- sector borrowings from nonresidents minus official reserves minus public-sector liquid claims on nonresidents minus financial-sector loans to, deposits with, or investments in nonresident entities. A negative number indicates net external lending. N/A- Not applicable. A$--Australian dollar. CARs--Current account receipts. FDI--Foreign direct investment. CAPs--Current account payments. The data and ratios above result from S&P Global Ratings' own calculations, drawing on national as well as international sources, reflecting S&P Global Ratings' independent view on the timeliness, coverage, accuracy, credibility, and usability of available information. | ||||||||||||||||||||||
| Ratings Score Snapshot | ||||||
|---|---|---|---|---|---|---|
| Key rating factors | Score | Explanation | ||||
| Institutional assessment | 1 | Strong track record in managing economic and financial crisis. The government has shown ability and willingness to implement reforms to ensure sustainable finances and economic growth. Cohesive society, low corruption, conducive business environment and extensive checks and balances support institutional setting. | ||||
| Economic assessment | 1 | Based on GDP per capita (US$) and growth trends as per Selected Indicators in Table 1. | ||||
| External assessment | 5 | The Australian dollar is an actively traded currency and based on Narrow Net External Debt/CAR as per Selected Indicators in Table 1.External short-term debt by remaining maturity that generally exceeds 100% of CAR, as per Selected Indicators in Table 1. | ||||
| Fiscal assessment: flexibility and performance | 2 | Based on the change in net general government debt (% of GDP) as per Selected Indicators in Table 1 and paragraph 164. We believe the structural change in net general government debt, after adjusting for temporary stimulus, is between 3-4% of GDP over the next few years.Australia has a greater ability to increase general government revenues or limit expenditure growth compared with countries with a similar level of development, as demonstrated by increases in revenues-to-GDP such as increasing the Medicare Levy surcharge, a temporary budget repair levy in 2014-2015, major bank levy in 2016-2017, asset sales, foreign buyer property surcharges, changes to stamp duties and land taxes. Further, governments generally control expenditure growth as a proportion of GDP, outside temporary COVID-19-related stimulus measures. | ||||
| Fiscal assessment: debt burden | 2 | Based on net general government debt (% of GDP) and general government interest expenditures (% of general government revenues) as per Selected Indicators in Table 1. | ||||
| Monetary assessment | 1 | Australia has a free-floating exchange-rate regime, and the Australian dollar is classified as an actively traded currency.The central bank has a track record of independence and uses market-based monetary instruments such as cash rate; CPI as per Selected Indicators in Table 1. The central bank has the ability to act as lender of last resort for the financial system. Depository corporation claims on residents in local currency and nonsovereign local currency bond market capitalization combined amount to over 200% of GDP. | ||||
| Indicative rating | aaa | As per Table 1 of "Sovereign Rating Methodology." | ||||
| Notches of supplemental adjustments and flexibility | 0 | |||||
| Final rating | ||||||
| Foreign currency | AAA | |||||
| Notches of uplift | 0 | Default risks do not apply differently to foreign- and local-currency debt. | ||||
| Local currency | AAA | |||||
| S&P Global Ratings' analysis of sovereign creditworthiness rests on its assessment and scoring of five key rating factors: (i) institutional assessment; (ii) economic assessment; (iii) external assessment; (iv) the average of fiscal flexibility and performance, and debt burden; and (v) monetary assessment. Each of the factors is assessed on a continuum spanning from 1 (strongest) to 6 (weakest). S&P Global Ratings' "Sovereign Rating Methodology," published on Dec. 18, 2017, details how we derive and combine the scores and then derive the sovereign foreign currency rating. In accordance with S&P Global Ratings' sovereign ratings methodology, a change in score does not in all cases lead to a change in the rating, nor is a change in the rating necessarily predicated on changes in one or more of the scores. In determining the final rating the committee can make use of the flexibility afforded by §15 and §§126-128 of the rating methodology. | ||||||
Related Criteria
- Criteria | Governments | Sovereigns: Sovereign Rating Methodology, Dec. 18, 2017
- General Criteria: Methodology For Linking Long-Term And Short-Term Ratings, April 7, 2017
- General Criteria: Principles Of Credit Ratings, Feb. 16, 2011
- General Criteria: Methodology: Criteria For Determining Transfer And Convertibility Assessments, May 18, 2009
| Ratings Detail (as of January 26, 2022)* | ||||||
|---|---|---|---|---|---|---|
| Australia | ||||||
| Sovereign Credit Rating | AAA/Stable/A-1+ | |||||
| Transfer & Convertibility Assessment | AAA | |||||
| Sovereign Credit Ratings History | ||||||
| 06-Jun-2021 | AAA/Stable/A-1+ | |||||
| 07-Apr-2020 | AAA/Negative/A-1+ | |||||
| 20-Sep-2018 | AAA/Stable/A-1+ | |||||
| *Unless otherwise noted, all ratings in this report are global scale ratings. S&P Global Ratings credit ratings on the global scale are comparable across countries. S&P Global Ratings credit ratings on a national scale are relative to obligors or obligations within that specific country. Issue and debt ratings could include debt guaranteed by another entity, and rated debt that an entity guarantees. | ||||||
S&P Global Ratings Australia Pty Ltd holds Australian financial services license number 337565 under the Corporations Act 2001. S&P Global Ratings" credit ratings and related research are not intended for and must not be distributed to any person in Australia other than a wholesale client (as defined in Chapter 7 of the Corporations Act).
This unsolicited rating(s) was initiated by a party other than the Issuer (as defined in S&P Global Ratings’ policies). It may be based solely on publicly available information and may or may not involve the participation of the Issuer and/or access to the Issuer’s internal documents and/or access to management. S&P Global Ratings has used information from sources believed to be reliable based on standards established in our policies and procedures, but does not guarantee the accuracy, adequacy, or completeness of any information used.
| Primary Contact: | Anthony Walker, Melbourne 61-3-9631-2019; anthony.walker@spglobal.com |
| Secondary Contacts: | Martin J Foo, Melbourne 61-3-9631-2016; martin.foo@spglobal.com |
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