On the same day when it revised the outlook for the U.S. rating to ‘negative’, the credit rating agency Fitch Ratings announced that it raised the long-term rating for the Australian currency debt at ‘AAA’ from ‘AA plus’, with a stable outlook, informs a press release. This is the first time that Australia gets a rating of ‘AAA’ (the best rating possible) from all three major rating agencies: Standard and Poor’s, Moody’s and Fitch Ratings.
“Improving Australia’s rating reflects its strong points, including high value added economy, strong political institutions, civil and social and the flexible political framework”, said director of Fitch sovereign ratings division, Art Woo. “The combination of low level of public debt, free exchange rate, credible inflation target, labor market liberalization and trade, all offer Australian authorities the flexibility to pursue counter-cyclical monetary and fiscal policies during the periods of economic crisis and recovery as well”, Art Woo said.
According to Fitch, one of the strengths of Australia is the low level of government debt relative to GDP, 26.3% of GDP in 2010/2011, while the average for countries in the ‘AAA’ group as 55.7 % of GDP in 2010. The credit rating agency estimates that the current boom in commodity prices has helped Australia to maintain a sustained growth amid the global financial crisis. However, Fitch warns that the boom carries a risk, given that a serious slump in commodity prices will have a negative effect on the economy of Australia.