In a resounding expression of confidence in the Morrison Government’s economic management S&P have affirmed Australia’s AAA credit rating and revised up its credit outlook to stable from negative, praising the “government's swift and decisive fiscal and health response” and “strong economic recovery”.
Australia remains one of just nine countries to hold a AAA credit rating from the three major rating agencies.
In its report S&P states: “the government's policy response and strong economic rebound have reduced downside risks to our economic and fiscal outlook for Australia. As a result, we are revising the outlook to stable and affirming our 'AAA/A-1+' long- and short-term local and foreign currency ratings".
S&P also noted the economic recovery has been “quicker and stronger than we previously expected” with the unemployment rate falling “surprisingly fast, to 5.5% in April 2021 from 7.4% in July 2020” which will “limit long-term economic scarring”.
Australia has outperformed every major advanced economy with our economy having “fully recovered lost output caused by the pandemic by March 31, 2021”.
Last week’s National Accounts saw the economy increase 1.8 per cent in the March quarter with output now 0.8 per cent above its pre-pandemic level.
This is a feat no major advanced economy has achieved and is in contrast to Japan, France, Germany and the UK who all contracted in the March quarter 2021 while the euro area is back in recession.
S&P do not expect “small outbreaks or short ‘circuit breaker’ lockdowns to derail [the] expected fiscal recovery” and that they “are more confident that the general government's fiscal deficits will narrow” and “servicing costs will remain manageable”.
S&P also acknowledges the Coalition’s efforts to return the Budget to balance for the first time in 11 years “on the back of tight fiscal discipline” which provided us with the fiscal firepower to support Australians during COVID-19.
The Morrison Government has committed an unprecedented $291 billion or 14.7 per cent of GDP in direct economic support for individuals, households and businesses.
With the unemployment rate having fallen for six consecutive months and more people in work than before the pandemic our economic plan is working.
The next stage in our plan as outlined in the Budget will secure Australia’s recovery from COVID-19.