Australia’s AAA rating affirmed | PerthNow
Ratings agency S&P Global has affirmed Australia’s AAA credit rating and expects the country to avoid recession despite gloomy global economic conditions.
The agency attributes the assessment to Australia’s improved fiscal position, with government deficits not expected to exceed two percent of GDP between 2023 and 2026.
Australia’s low unemployment and high energy commodity prices also put the country in a stable position, with S&P expecting economic growth over the next three years.
“We expect the budget to improve due to steady revenue growth, high commodity prices and expenditure containment,” it concluded.
The agency also upgraded Australia’s government debt outlook to 30 percent of GDP in 2024 from 34 percent previously, with debt levels modest compared to other nations.
Australia is one of only nine countries rated AAA by all three major credit rating agencies.
Treasurer Jim Chalmers said it recognized the Albanian government’s responsible budget management.
“Australia’s strengthening fiscal position is a result of our responsible fiscal management which has returned most revenue upgrades to the budget while restraining spending growth,” Dr Chalmers said.
He said the fiscal discipline would put the budget on a more sustainable footing while addressing high inflation.
“We want to avoid putting upward pressure on prices and making the job of the independent Reserve Bank more difficult.”
S&P Global does expect growth to slow as interest rate hikes flow through the economy.
Under the worst-case scenario – where the economy underperforms, government spending rises and commodity prices weaken significantly – the rating agency could be forced to downgrade its rating.
“We may downgrade our ratings if we believe that the general government deficit is unlikely to reduce over the next two years, which will cause debt and service costs to rise,” it said.
The strong labor market is also delivering higher wages, with the Employment Hero small and medium-sized business index showing that median hourly wages grew by 8.2 per cent over the 12 months to December.
Median wages were flat over November and December, but rose 1.2 percent in December, according to the index’s measurements.
The index, which is not seasonally adjusted and includes penalty rates, allowances and bonuses, relies on data from 135,000 small and medium-sized enterprises.
Ben Thompson, chief executive of Employment Hero, said the rise in wages was likely driven by the holiday period.
“However, this growth has not fed into the median wage rates of under-18s or 18-24-year-olds, with both age groups experiencing a decline of 7.5 per cent and 2.3 per cent respectively,” he added.
Finance Minister Katy Gallagher said slow wage growth had been a feature of the past decade and fair negotiations between unions and employers were key to unlocking higher pay packages.
The senator would not be drawn on whether the government would back the Construction Forestry Maritime Mining and Energy Union which is pushing for “significant” pay rises.
“It is very surprising that a trade union would advocate for better wages for its workers,” she told ABC radio.
Official data shows that wages rose by 3.1 per cent over the 12 months to September, which is well behind the 7.3 per cent reading over the same period and the 7.8 per cent increase over the 12 months to December.
Senator Gallagher said effective bargaining between employers and unions would drive sustainable wage growth.
Last year, the Albanian government passed new workplace laws, including the expansion of multi-employer bargaining rights.