17 August 2016
Media Release - #2016068, 2016

Moody’s affirms Australia’s AAA credit rating

The Turnbull Government welcomes the decision by Moody's Investors Service to affirm Australia's triple-A credit rating with a stable ratings outlook.

In these difficult economic times, maintaining our triple-A rating is a welcome boost and a timely reminder that we need to keep our focus on the policies that keep our economy strong.

The factors cited by Moody's to support their rating affirmation were:

  • Moody's expectation that Australia's demonstrated economic resilience will endure in an uncertain global environment
  • A very strong institutional framework
  • Stronger fiscal metrics than many similarly rated peers – despite the increase in government debt from previous low levels – which it expects to remain consistent with a triple-A rating over the medium term

Moody's notes that Australia's economic growth is matched by few comparable economies and that our economy is effectively managing the transition from the mining investment boom to a more diversified economy, including the impact of lower commodity prices.

Our triple-A rating helps to keep borrowing costs low for businesses and consumers across the economy, as well ensuring Australia is in a much stronger position in the event of any external economic shocks. This is important in an increasingly uncertain and volatile global economy.

That is why Australia's triple-A rating matters and why the Government will continue to seek to implement policies that grow the economy and reduce the deficit.

One of the risks cited by Moody's is potential opposition to budget repair in the new parliament.

The Moody's statement notes:

"Moderate nominal GDP growth will continue to dampen government revenues while the government faces political hurdles to the implementation of fiscal tightening measures, as it rules with a very thin majority in the House of Representatives and a splintered Senate. The effectiveness of fiscal policy may be undermined somewhat."

It also notes:

"Indications that the hurdles to fiscal consolidation are higher than we currently expect, leading to a materially faster deterioration in fiscal metrics would also put downward pressure on the rating."

Support in the Parliament to implement the Turnbull Government's economic plan for jobs and growth, to avoid higher debt and reduce the deficit is necessary to support maintaining our triple-A rating.

Moody's decision follows the decision by Fitch Ratings last month to also affirm Australia's triple-A credit rating with a stable outlook.