US ratings agency out with their review of yesterdays Australian govt budget plans 4 May 2016
- fiscal plans are key
- 2016-17 broadly neutral for public finances
- consistent with existing sovereign rating of AAA
I reported the Budget here with early reaction from Fitch and also S&P
Say Fitch:
"A credible fiscal consolidation strategy, responsive to economic conditions, would help preserve fiscal buffers against potential shocks facing the Australian economy, both domestic (eg the risk of a housing market bust) and external (eg another fall in iron ore prices, or a more pronounced China slowdown). If there were a lasting improvement in economic parameters, for example a better outlook for the terms of trade, we assume the authorities would allow the deficit to narrow more quickly. The Reserve Bank of Australia's 25bp rate cut on Tuesday may also support growth.
We also assume greater consolidation efforts should the structural deficit prove wider than anticipated. The government's estimate of the structural deficit has narrowed, but forecasting is subject to significant uncertainties around the outlook for private investment, productivity and export competitiveness. The nation's debt-carrying capacity could be enhanced if the government's Enterprise Tax Plan and National Infrastructure Plan are able to unlock improvements in trend growth.
The broad political support for fiscal responsibility means we do not expect a significant change in fiscal strategy following the elections that are likely to be held in early July, although the policy mix may change."
Full report here.
