S&P: 1 in 3 chance of Aust downgrade


Australia’s government has a one in three chance of losing its AAA credit rating from its virus spending, says the agency that flagged a negative outlook.

Standard & Poor’s international public finance director Anthony Walker says the downgrading of the outlook on Wednesday acknowledged large increases in deficits in the next two years.

The government is spending $320 billion to try to keep the economy going past the coronavirus pandemic, including $130 billion in wage subsidies.

Mr Walker said the downgrading of the outlook on the credit rating was not a reflection on the spending but that the government had greater debt.

“They are not losing fiscal discipline, they are responding to an external shock that has hit the economy,’ he said on Thursday.

He said it was not S&P’s base case to lower the rating.

Mr Walker expected Australia’s fiscal position to weaken for the next two years but anticipated a rebound in 2022.

He declined to give figures as to budget positions that would ensure the government retained its rating.

Standard & Poor’s also issued negative outlooks for the ACT, NSW and Victorian governments.

The big four banks and Macquarie received the same treatment.

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