Australian economy gets AAA approval but inflation 'dragon' fight continues
A global ratings agency has given the Australian economy a good bill of health and even indicated recession might be avoided at home amid grim global conditions.
S&P Global Ratings reported on Monday some key reasons for giving the continued AAA rating:
Australia's improving fiscal balance supports our 'AAA' long-term sovereign credit rating. We forecast the general government deficit will be less than 2% of GDP between 2023 and 2026, and net general government debt will remain modest at about 30% of GDP over this period.
Australia's economy will likely avoid recession and expand over the next three years. This reflects low unemployment and high commodity prices. Australia benefits from being a net energy exporter.
Our ratings on Australia benefit from its strong institutional settings, wealthy economy, and monetary policy flexibility. Although external indebtedness is high, external risks are balanced by a current account surplus.
Federal assistant treasurer Stephen Jones told FlowFM listeners the government wasn't resting on its laurels, but rather continuing to fight the inflation 'dragon':
"The world still wants to pay high prices for the things that Australia is selling our commodities. Whether it's stuff we grow or our resources, there's still hot demand for that and very strong labour market people are in job. "Most of the businesses I talk to, their biggest problem is that they can't get the staff they need. So that's good news for workers who are trying to get a job or trying to get a new job. Of course, inflation is the big dragon. "We've got time this year and that's why so much of our efforts as we plan the details for the May budget is around how we can provide some targeted the cost of living relief, (looking) to ensure we don't blow the economy up through working in the opposite direction to the Reserve Bank. "
Listen to the full interview on the Flow podcast player below:
This is an automatically generated transcript - E&OE
LAMBERT: 00:00 We're joined again on Flow FM by the assistant treasurer Steven Jones. Stephen, last time we talked about scams, we're always on the lookout for those, but someone who's not a scam is the global ratings agencies who have given Australia our economy a clean bill of health.
JONES: 00:13 Yes, good news. It means that our, you know, guarded optimism for the year ahead is shared by some of the global rating agencies. In fact, most of the global rating agencies. We know households are doing it tough, with inflation still unacceptably high. 00:30 But the good news is unemployment is low, people can find work and if they're not happy with the job they've got, there's plenty of alternatives out there. So that's good news. Employers still looking to put on staff and still looking to invest in your business. Speaker 1 00:50 The future outlook is good. Not without some bumps in the road ahead. The war in Ukraine is still keeping prices of energy high and very uncertain global circumstances. But I'm cautiously optimistic about the path.
LAMBERT 01:06 Play Through everyone's relying on the data they've got before them. But I'm encouraged to see them saying our economy will likely avoid recession and in fact expand over the next three years. Given the outlook for the rest of the world, that's pretty positive news as well.
JONES 01:19 Very positive news. The world still wants to pay high prices for the things that Australia is selling our commodities. Whether it's stuff we grow or our resources, there's still hot demand for that and very strong labour market people are in job. 01:35 Most of the businesses I talk to, their biggest problem is that they can't get the staff they need. So that's good news for workers who are trying to get a job or trying to get a new job. Of course, inflation is the big dragon. 01:48 We've got a time this year and that's why so much of our efforts as we plan. Details for the May budget is around how we can provide some target at the cost of living relief, but to ensure we don't blow the economy up through working in the opposite direction to the Reserve Bank.
LAMBERT: 02:05 Well, they recognised expenditure restraint is one thing the government's doing. They would have had a very forensic look at your federal budget from last November. So I guess that's an endorsement, is it, of the government's current economic settings and policies? 02:17 Look, it's no time for us to be patting ourselves on the back because there's still a lot of work to be done. But we're pleased that the things we've done in the first seven months are getting a tick of approval by the global ratings agencies. 02:32 But, of course, the ones that matter the most to the people here in Australia, they're the ones we serve and they're the ones who support we need to do the work that we've got ahead of us. So whether it's ensuring we're setting ourselves up for the future through investment in technology, the energy transition, new infrastructure, new skills, or whether we're putting in place stuff like our childcare and aged care plans, there's so much to be done. 02:59 But that's what we're elected to do, Rikki
You mentioned the Reserve Bank just before their meeting next Tuesday, their first meeting of the year. Most expectations, given the ABS's inflation data, that rates will rise again, is there a concern about the direction we're heading with interest rate increases? 03:16 Any rise in interest rates is a concern because we know the impact that has on households and businesses. We also know that a hell of a lot of households with mortgages haven't yet felt the impact of what's already been a significant increase in those Reserve Bank rates, because they are on fixed rate mortgages that don't roll off until sometime around mid year. 03:40 So we know that there is a bit of a crunch coming, which is all the more reason why we've got. Look in every corner for relief and support for Australian households who are doing it tough.
It's a busy time for you with all those prebudget submissions coming in. 03:55 Stephen Jones, assistant treasurer. Thanks so much for joining us today on Flow.
Good to be with you, Rik.