S&P: Ratings on Australia affirmed At ‘AAA/A-1+’

MELBOURNE (Standard & Poor’s): Standard & Poor’s Ratings Services said Friday that it has affirmed its unsolicited ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings on the Commonwealth of Australia. The outlook remains stable.

“The ratings on Australia reflect Standard & Poor’s view of the country’s ample fiscal and monetary policy flexibility, economic resilience, public policy stability, and its sound financial sector,” said credit analyst Kyran Curry, of the Sovereign Ratings group. “We believe these factors demonstrate Australia’s strong ability to absorb large economic and financial shocks, such as the global recession in 2009.

These strengths are moderated by Australia’s high reliance on external savings and commodity income to fund growth, its high household debt, and emerging fiscal pressures associated with an aging population.”

The Australian economy performed relatively well in the year ended June 30, 2011, as mining exports and private investment in mining and liquefied natural gas offset temporary economic weakness associated with natural weather disasters.

We believe the economy has favorable prospects for sustained growth while there remains strong demand for commodities from emerging Asia, particularly China.

Mr. Curry added: “In our view, the Australian economy’s overall resilience, including to the global downturn in 2009, reflects decades of structural reforms, wages restraint, and a sound savings rate.

However, Australia has what we consider to be strains on its financial sector compared to other highly rated sovereigns, reflecting its heavy external borrowings to partly fund investment in its mining sector.