Australia remains one of only nine nations to hold a AAA credit rating

February 25, 2021

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Global credit agency Fitch Ratings has affirmed Australia’s top-tier AAA rating, saying the economy has weathered the COVID-19 pandemic well, reflecting a successful virus containment.

Treasurer Josh Frydenberg jumped on the announcement, saying Australia remains one of only nine nations to hold a AAA credit rating.

“Fitch says we have ‘weathered the pandemic well compared with peers’ and ‘Australia’s labour market appears to be on a stable path to recovery, supported by the JobKeeper program’,” Mr Frydenberg tweeted.

However, Fitch has kept Australia’s rating on a negative outlook, reflecting uncertainty around the medium-term debt trajectory following the significant rise in public debt caused by the response to the pandemic.

“Policy settings are set to remain accommodative, although we project the bulk of fiscal stimulus has now passed,” Fitch said in a statement on Monday.

“Risks remain tilted to the downside, reflecting the possibility of additional and broader lockdown measures to contain any resurgence of the virus.”

However, the vaccine rollout should gradually ease these risks over the year and support domestic sentiment, it said.

Australia’s nationwide vaccine rollout started on Monday.

Shadow treasurer Jim Chalmers said by sticking with the negative outlook, Fitch is signalling there is still a long way to go in Australia’s recovery.

“The biggest threat to our recovery is Scott Morrison and Josh Frydenberg prematurely declaring victory,” Dr Chalmers told AAP. “(This ignores) the fact that over two million Australians still don’t have work or enough work, wages are stagnant, and our economy had become less dynamic and resilient well before the pandemic.

Jobs down but construction work improving 

November 4, 2020  

Colin Brinsden, AAP Economics and Business Correspondent 
(Australian Associated Press) 

Employment and wages growth continues to weaken despite some positive signs in the economy, with the construction sector expanding for the first time in two years. 

Payroll jobs fell 0.8 per cent in the fortnight ending October 17 following a 0.9 per cent drop in the previous two weeks. 

Compared to the beginning of the coronavirus pandemic in March, payroll jobs have fallen 4.4 per cent. 

Wages also fell by 2.1 per cent in the latest reported fortnight to be down 5.1 per cent since March. 

At the same time, retail trade fell 1.1 per cent in September, the Australian Bureau of Statistics has found. 

However, retail turnover jumped 6.5 per cent over the September quarter, a solid result for the economic growth calculation due in December. 

“This confirms that outside of Victoria, where volumes fell 4.2 per cent as a result of the lockdown, the recovery in household spending is well underway,” BIS Oxford Economics chief economist Sarah Hunter said. 

Cutting the cash rate to a record low 0.1 per cent on Tuesday, Reserve Bank governor Philip Lowe said the economic recovery is up and running and the September quarter national accounts will show positive growth. 

The construction industry is another sector that appears to have turned a corner, buoyed by house building and less pronounced declines in apartment and engineering works. 

The Australian Industry Group/Housing Industry Association performance of construction index rose 7.5 points in October to 52.7, indicating a mild expansion in the sector. 

The index has breached the 50-point mark for the first time since 2018. 

HIA executive director Geordan Murray said low interest rates, government grants and other fiscal stimulus measures were lifting demand for detached housing. 

“These are positive signs that policy settings are working to generate employment throughout the initial phase of the economic recovery,” Mr Murray said. 

Dr Lowe said with Australia facing a period of high unemployment, the central bank was committed to doing all that it could to support the creation of jobs. 

The cut in the RBA’s cash rate would save more than $30 a month on a $400,000 variable rate mortgage if passed on in full by retail banks. 

But the Commonwealth Bank, the nation’s largest retail lender, has instead cut its fixed-rate home loans and some business loan rates and left its variable rate unchanged. 

The other three major banks have remained silent. 

However, a handful of smaller banks have cut their variable rates from between 0.10 per cent and 0.20 per cent with immediate effect.

Big spend as Frydenberg goes for growth

October 7, 2020

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Despite Josh Frydenberg’s gigantic spend-up, his second budget contained very few big surprises after the carefully crafted run-up to the treasurer’s big night.

In the past week or so, big, multi-billion dollar initiatives have been announced on a daily basis, from an apprenticeship initiative to giving the regions and tourism a cash injection.

The bringing forward of already legislated tax cuts, due in 2022, has been flagged for months.

Even so, the spend-a-thon that will see the budget deficit balloon to a record $213.7 billion and government debt exceed $1 trillion for the first time is aimed at digging the economy out of recession and getting people back into work.

The budget is forecasting a huge acceleration of economic growth in the next financial year, from a contraction of 1.5 per cent in 2020/21 to brisk 4.75 per cent expansion.

From there on growth is expected to hum at a rate of 2.75 per cent to three per cent, something that has not been seen for a while.

There is also hope that unemployment is not far from its peak, with Treasury now predicting a top of eight per cent later this year, rather than nine per cent, and by 2023/24 falling to 5.5 per cent.

But there is a big assumption to this somewhat healthier outlook, given how deep Australia’s first recession in three decades has been.

It relies on there being a COVID-19 vaccine by the end of 2021.

Mr Frydenberg explained if a vaccine is found six months earlier, that would give a $34 billion boost to the economy.

But he also warned if there was a second or third wave of virus cases in Australia, that could hurt the economy by $55 billion.

“There is a lot of uncertainty in this economic environment, it’s an unprecedented time,” he told reporters.

“We are leaving no stone unturned to get access to the vaccine.”

In the meantime, the government is racking up a huge bill trying to keep life on an even keel in these uncertain times.