Standard & Poor’s has downgraded Australia’s credit rating outlook from stable to negative.
It is the first of the big three ratings agencies to take any adverse action on Australia’s credit rating and pointed to the outcome of the federal election as a contributing factor in the decision.
Although the country’s AAA credit rating remains intact for now, shifting the outlook from stable to negative serves as a warning that the rating is under threat.
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In a statement explaining its decision, S&P warned the AAA rating could be slashed if Australia’s budget position did not improve.
“There is a one-in-three chance that we could lower the rating within the next two years if we believe that parliament is unlikely to legislate savings or revenue measures sufficient for the general government sector budget deficit to narrow materially and to be in a balanced position by the early 2020s,” S&P said in the statement.
“The negative outlook on Australia reflects our view that prospects for improvements in budgetary performance have weakened following the recent election outcome.”
“Given the outcome of the July 2, 2016, double-dissolution election, in which neither of the traditional governing parties may command a majority in either house, we believe fiscal consolidation may be further postponed.”