“The negative outlook on Australia reflects a substantial deterioration of fiscal headroom at the ‘AAA’ rating level and our view that risks remain tilted toward the downside,” S&P Global Ratings said in a statement on Tuesday, as reported by Reuters.
Additional takeaways
“Downside risks remain after the budget, underpinning our negative outlook on Australia.”
“Upturn in revenue will afford the government some headroom for the new measures.”
“Trade tensions and geopolitical risks are also likely to hinder parts of the economy.”
“Critical to maintaining the ‘AAA’ credit rating is our base-case expectation that fiscal deficits will narrow toward their long-term trend.”
Market reaction
This report doesn’t seem to be having a significant impact on the AUD’s performance against its rivals. As of writing, the AUD/USD pair was up 0.2% on the day at 0.7845.
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