Rating agency S&P kept Australia’s sovereign rating unchanged at AAA, but downgraded the outlook from “stable” to “negative”. The outlook was upgraded from “negative” to “stable” less than two years ago in September 2018, when the budget came close to balance.
“The COVID-19 outbreak has dealt Australia a severe economic and fiscal shock” S&P said. “We expect the Australian economy to plunge into recession for the first time in almost 30 years, causing a substantial deterioration of the government’s fiscal headroom at the ‘AAA’ rating level.”
Nevertheless, “while fiscal stimulus measures will soften the blow presented by the COVID-19 outbreak and weigh heavily on public finances in the immediate future, they won’t structurally weaken Australia’s fiscal position,” S&P said.
Treasurer Josh Frydenberg said the outlook downgrade was “a reminder of the importance of maintaining our commitment to medium term fiscal sustainability.”
