subscribe to our newsletter
Australia to ‘definitely’ lose AAA rating

Australia to ‘definitely’ lose AAA rating

There is “no question” that Australia will lose its AAA rating in 2016, with the downgrading likely to occur by August at the latest, according to one investment manager.

BT Investment Management’s head of income and fixed interest, Vimal Gor, said the current AAA rating from Standard & Poor’s, Fitch Ratings and Moody’s Investors Service is likely to go by July 2016.

Moody’s has previously warned that the plan to curb government spending is unlikely to balance finances, and could result in a “credit negative” for the country.

Mr Gor argues that this will see a drop in the value of the Australian dollar to below $US0.60, given Australia’s current twin deficit is “moving the wrong way”.

“The AAA is great when you have twin deficits because … it helps you to support your currency. But when that goes, I just think the currency has got sub-60 written all over it,” he said.

Other investment managers also argue this, with UBS Asset Management’s head of fixed income for the Asia-Pacific, Anne Anderson, suggesting that “life continues”.

“There are lots of countries that have lost their AAA, that hasn’t meant anything, but our currency adjusts well,” she said.

In a note to investors earlier in 2016, AMP Capital’s chief economist Shane Oliver cautioned that losing the AAA rating would mean the previous 20 years of budget reform would “come to nought”.

[Related: Australia headed for ‘growth upswing’]

Australia to ‘definitely’ lose AAA rating
mortgagebusiness logo

Latest News

It is incumbent upon home loan assessors to assume that a credit card holder has the capacity to meet full financial repayments within a “...

The number of Australian homes generating a resale profit has declined, with national resale gains the lowest they’ve been since October 2...

The federal government has announced the resignation of the corporate regulator’s deputy chair, Peter Kell, following seven years of servi...

FROM THE WEB

podcast

LATEST PODCAST: Upheaval at the major banks

Is enough being done to ensure responsible lending?