New Australia government keeps AAA ratings

SYDNEY (AFP) - International credit agencies Standard & Poor's (S&P), Moody's and Fitch on Monday reaffirmed Australia's AAA sovereign rating after the conservatives won power, saying they expected little change to the fiscal framework.

All said their ratings were not immediately affected by the change of government.

"The ratings on Australia reflect the country's significant fiscal and monetary flexibility, economic resilience, and public policy stability," S&P said in a statement.

"We expect the new government to pursue a broadly similar fiscal strategy to the previous government, targeting narrowing budget deficits over time."

Moody's Investors Service also said Australia's AAA sovereign rating would not change after Mr Tony Abbott, who heads a centre-right Liberal-National coalition, won elections on Saturday, ending six years of Labor rule.

"Moody's AAA rating of the Australian government is based on the long-standing fiscal policy framework that results in balanced budgets or surpluses and low government debt in relation to other highly rated sovereigns," it said.

It added that the current string of modest deficits stemmed from conditions during and after the global financial crisis and not any overall change towards deficits and debt. It said the overall policy framework had been in place during governments led by both Labor and the Liberal/National coalition.

"We believe that the return to power of a coalition government will not result in changes to the framework and, therefore, that the government will continue to record only small deficits before eventually returning to surplus," Moody's said.

The agency said while economic growth may remain "somewhat subdued" during 2013, it expected some pickup in 2014, which would help the new government manage its budgetary balance.

Fitch Ratings said Mr Abbott was unlikely to shift the government's near-term fiscal position or its medium-term trajectory given "the absence of deep ideological divides between the two main parties on core aspects of fiscal management".

"Therefore, the election result is neutral for the sovereign's credit profile (as reflected in the AAA/Stable rating which was last affirmed in April)," it said in a statement.

Fitch said it expected the new government would remain on track to reaching a modest budget surplus by 2017, adding that the relatively strong political consensus on overall fiscal prudence was a key factor underpinning Australia's strong sovereign credit profile.

"The upshot is that any post-election shift in fiscal policy should be minor, and unlikely to alter the overall stance of fiscal policy or the trajectory of government finances," it added.

Australia, which survived the financial crisis without dipping into recession, remains one of a small group of nations that still have the coveted AAA rating from all three ratings agencies.