S&P downgrades Australia’s credit on deficit worries
Global ratings agency Standard & Poor’s downgraded Australia’s sovereign credit rating outlook to AAA negative from AAA stable on Thursday, warning that the country’s path back to budget surpluses is in danger.
“We are revising the rating outlook on Australia to negative from stable because we believe that without remedial action, the government’s fiscal stance may no longer be compatible with the country’s high level of external indebtedness,” S&P said in a statement.
The decision follows a cliffhanger federal election on Saturday; Legislative gridlock is likely to be in the cards. Votes are still being counted and neither major party is able to form a government in the 150-seat House of Representatives.
“The negative outlook on Australia reflects our view that without the implementation of more forceful fiscal policy decisions, material government budget deficits may persist for several years with little improvement,” S&P said.
Australia’s budget has fallen deeper into deficit since the global financial crisis, as successive governments have been unable to tip the balance back toward surplus. Falling commodity prices have eroded the budget in recent years.
Source: MarketWatch
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