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Dr. Mark Sinclair
Dr. Mark Sinclair, Mentor Education

Australia’s AAA credit rating not at risk – S&P

19 May 2014
Tony Abbott
Tony Abbott

Standard & Poor’s ratings agency has contradicted the prime minister and treasurer’s claims that the opposition will put the country’s AAA credit rating at risk by blocking budget measures in the Senate.[more…]

S&P has rejected comments by Tony Abbott and Joe Hockey’s after they seized upon reports in a recent Financial Review article Australia’s Credit Rating at Risk that implied that the agency could review the country’s credit rating if no substantial cuts were made to the budget in coming years. S&P sovereign analyst, Craig Michaels, said in the article,“that the nation’s prized credit rating could be reviewed if parliament fails to approve significant budget cuts”, but did conceded that “there is no immediate risk to the AAA credit rating”.

A spokesman for S&P has since said that, “the rating is not at risk.” Furthermore the spokesman confirmed that, “Australia had a “stable outlook”, indicating that that there was, “33% chance that the country’s coveted AAA-rating will be downgraded in the next two years.”

Comments by Tony Abbott said: “If these necessary measures don’t pass the Senate our AAA credit rating is at risk, and if we lose our AAA credit rating we pay higher rates of interest on our debt, and that means it’s more than $1bn a month, every single month, just to pay the interest on the borrowings.”

The prime minister also accused Labour of being “fiscal vandals” by putting the AAA credit rating at risk but Opposition Leader Bill Shorten rebuked the claim by saying, “If Tony Abbott squanders our AAA rating then it’s on his head,” and “If they lose us our AAA credit rating then we hold the Abbott government squarely responsible. It’s happened on their watch;
their issue.”

Other finance commentators have also weighed into the debate with Alan Oster from the NAB commenting that, “really what S&P are saying is there is less than a one in three chance they will change the rating if the budget doesn’t get through…those comments are looking a little bit political.”

Shane Oliver from AMP Capital said that S&P’s warning “partly supports the government’s line of reasoning that we have to keep the budget under control but the question is how this is done.”

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