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Australia Losing AAA Rating Is Inevitable, Hewson Says

  • Former Liberal leader, central bank economist speaks on Sky TV
  • Australia’s top credit rating still pressured, S&P has said

It’s only a matter of time before Australia loses its AAA credit rating as the nation’s budget falls further into deficit, according to John Hewson, a former Liberal Party leader and central bank economist.

“The fact that we are going to lose the triple-A credit rating is a foregone conclusion, it’s just a question of timing,” Hewson, who was leader of the Liberal opposition in the 1990s, told Sky News TV on Sunday.

Hewson said he hasn’t seen any realistic debate by the government or opposition about how to return the budget to surplus by the end of the decade. Australia’s budget has been in deficit since 2008 and isn’t forecast to return to surplus until at least 2021, according to the latest one released by Treasurer Scott Morrison in May.

Australia’s AAA rating is still under pressure even as coal prices climb, Kim Eng Tan, a senior director of sovereign ratings for Asia Pacific at S&P Global Ratings, said on Nov. 30. Australia is a major exporter of coal. The government has struggled to rein in its fiscal shortfall as lower commodity prices have crimped revenues and parliament has stymied savings measures.

Political uncertainty from the 2016 election, which the Liberal-National coalition won with a one-seat majority, continues to contribute to Australia’s negative outlook, Tan said on a webcast. S&P said in July there was one-in-three chance it could lower the country’s top credit rating within two years.

BlackRock Inc.’s head of Australia fixed-income Stephen Miller said in November that Australia could be stripped of its AAA rating as early as this month if the government’s interim budget review shows further deterioration.

Morrison is due to release a mid-year economic and fiscal outlook on Dec. 19.

Australia is currently the highest-yielding issuer among 10 nations with top ratings from the three major assessors, and a downgrade could lessen the appeal of Aussie debt for international investors who hold the majority of the country’s sovereign notes.

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