This is why Moody’s affirmed Australia AAA rating

At the start of August, Australia faced the threat to be downgraded by major rating agencies. However, Moody’s has affirmed Australia AAA rating. What are the reasons behind Moody’s decision? 

17 August, AtoZForex –  Recently, Australia was faced with a threat to lose its triple-A rating as the country failed to properly disclose the winner of the Australian federal election as well as the debt level followed the wrong trend. However, rating agencies have not downgraded the country, and recently Moody’s even affirmed Australia AAA rating. The U.S. rating agency stated that it anticipates the Australian economy to remain stable.

Reasons behind Moody’s decision

The first reason to why Moody’s affirmed Australia’s credit rating, deals with the expectations that Australia will survive in a vague economic environment. As the country proved to have a resilient economy. Secondly, the country has a solid institutional framework. Thirdly, the rating agency mentioned that Australia has strong fiscal metrics. Despite the increase in the government debt, Moody’s anticipate fiscal metrics to remain consistent with AAA rating over the medium term.

Nevertheless, Australia is not off the hook yet. Considering that the country still face a number of risks, which will affect the Australia’s rating. These risks are country’s reliance on external financing, high household debt, and increasing residential property prices. According to the rating agency, the Australian government will be able to react to these risks.

See also: July FOMC minutes expectations & Fed hike effect

Are Swiss banks creditworthy?

In addition to the affirmation of Australia AAA rating, Moody’s has also reviewed the Swiss banking and financial sector. The rating agency kept its outlook stable on the creditworthiness of banking system in Switzerland. According to Moody’s, it anticipates operating conditions remain strong. The expectations are based on the assessment that Swiss banks continue to have minor issues with loan ratios and capital buffers. Moreover, the Swiss banks do not rely heavily on confidence-sensitive capital market funding, while have adequate loss absorption capacity.

Moody’s expects the Swiss GDP to grow 1.4% in 2016 and approximately 1.8% in 2017, while the unemployment rate will remain low. Referring to challenges, the rating agency believes that the Swiss banks’ low and even negative interest rates will impact Switzerland.

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