New Australia government keeps AAA ratings

Australia's conservative leader and prime minister-elect Tony Abbott (R) talks to the Secretary of the Department of the Prime Minister and Cabinet Ian Watt (L) in Sydney. (AFP/Daniel Munoz)

SYDNEY: International credit agencies Standard & Poor's and Moody's on Monday kept Australia's sovereign rating at AAA after the conservatives won power, saying they expected little change to the fiscal framework.

S&P's said its ratings were not immediately affected by the change of government.

"The ratings on Australia reflect the country's significant fiscal and monetary flexibility, economic resilience, and public policy stability," it said in a statement.

"We expect the new government to pursue a broadly similar fiscal strategy to the previous government, targeting narrowing budget deficits over time."

Moody's Investors Service also said Australia's AAA sovereign rating would not change after Tony Abbott, who heads a centre-right Liberal/National coalition, won elections on Saturday, ending six years of Labor rule.

"Moody's AAA rating of the Australian government is based on the long-standing fiscal policy framework that results in balanced budgets or surpluses and low government debt in relation to other highly rated sovereigns," it said.

It added that the current string of modest deficits stemmed from conditions during and after the global financial crisis and not any overall change towards deficits and debt.

"This fiscal policy framework has been in place during governments led by both Labor and the (Liberal/National) coalition parties," it said.

"We believe that the return to power of a coalition government will not result in changes to the framework and, therefore, that the government will continue to record only small deficits before eventually returning to surplus."

Moody's said while economic growth may remain "somewhat subdued" during 2013, it expected some pickup in 2014, which would help the new government manage its budgetary balance. 

S&P's said it expected spending on infrastructure projects and a new paid parental leave scheme as promised by Abbott, but this would be broadly offset by savings, particularly cuts to bureaucracy and an unwinding of Labor policies which delivered household benefits.

"We expect the new government to shortly commission a review of government finances, which may pave the way for further spending cuts," it said.

Australia, which survived the financial crisis without dipping into recession, remains one of a small group of nations that still have the coveted AAA rating from all three ratings agencies, which also includes Fitch.