Australia’s stable AAA rating reflects strong institutions and modest debt, but slower GDP growth and inflation pose challenges for the AUD.
S&P has maintained Australia’s AAA sovereign rating with a stable outlook, citing robust institutions, credible monetary policy, and manageable public debt. The agency projects deficits to stay around 1.6% of GDP over the next two years, with net debt stabilizing near 28% by fiscal 2029.
Despite fiscal strength, real GDP growth is expected to slow to 1.5% in fiscal 2027 as higher interest rates curb demand. Inflation remains above target, productivity is weak, and per capita GDP has declined in most of the past 15 quarters, signaling structural challenges.
Downside risks include weaker fiscal outcomes and softer per capita growth, which could pressure the Australian Dollar (AUD) over the medium term.