S&P says commodity rally won’t save Aussie AAA
Ratings agency Standard & Poor’s has warned that it will look past the rally in commodity prices when it evaluates Australia’s fiscal health as the nation’s prized triple-A credit rating remains at risk of a downgrade.
Australia’s sovereign rating has been classified as “on watch” by S&P since July, meaning there is a one-in-three chance it will be lowered.
Heading into the government’s budget update of December 19, the fiscal situation looks considerably healthier than it did at May’s federal budget thanks to the remarkable recovery in the price of coal, iron ore and other commodities.
But S&P analysts are not convinced that commodity prices will stay at these levels because it is largely driven by higher demand stemming from policy in China.
Kim Eng Tan, senior director for sovereign and international public finance ratings, said on Wednesday that S&P was forecasting China’s investment growth slowing.
“In terms of the government’s medium-term fiscal outlook, we are not quite sure that the recent rebound in prices are likely to be of a very big help in helping the government to reach a balanced budget that it promises by 2021.
“Now this 2021 target has actually been pushed back quite a few times over the course of the past few years,” he said, beginning with the initial target of 2013.
i dont think a downgrade is going to happen..but look at the power these ratings companies have to determine and dictate government policy..
“Australia’s sovereign rating has been classified as “on watch” by S&P since July, meaning there is a one-in-three chance it will be lowered.”