Ratings agencies welcome Australia's surplus pledge

Australia's prized triple A credit ratings appeared safe on Tuesday as two leading ratings agencies welcomed the government's promise to return its budget to surplus within four years, after more than a decade of deficits.

Flag of Australia on a beach
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Flag of Australia on a beach

Australia is among 10 countries still rated triple A by all three major agencies, but slower economic growth in recent years and a stubborn fiscal deficit have jeopardized its top ranking.

Australia's conservative government pledged to deliver a small A$7.4 billion ($5.4 billion) surplus in 2020/21, an improvement on the A$1.08 billion it forecast in the mid-year review in December.

"These projections denote ongoing commitment to fiscal consolidation," said Marie Diron, an associate managing director, at Moody's Investors Service, adding Australia's fiscal position was a key support to the government's triple A rating and stable outlook.

Underpinning the return to surplus are revenue-raising measures including a national health levy and a new charge on major banks which will offset savings that were in previous budgets but blocked in parliament.

Moody's said the removal of the blocked measures from the budget projections enhanced the transparency and predictability of budget outcomes and was a credit positive.

Fitch also welcomed the new revenue proposals as they implied a faster reduction in general government deficit than the ratings agency had projected in its September review.

Still, while Fitch and Moody's were quick to say the budget had no major impact on Australia's top ratings, S&P Global was not immediately available to comment.

S&P put Australia on negative watch last July, citing weakened prospects for improvement in budgetary performance.