Australia’s top credit rating is upheld despite slowing GDP growth and inflation pressures, while RBA rate hike bets support the currency.
S&P Global Ratings has reaffirmed Australia’s AAA credit rating, citing low public debt and strong institutions. The agency projects a fiscal deficit of 1.6% of GDP over two years, with net debt stabilizing near 28% by fiscal 2029.
However, economic growth is expected to slow to 1.5% in fiscal 2027, with weak productivity and above-target inflation weighing on the outlook. Per capita GDP has declined in ten of the last 15 quarters, signaling broader economic challenges.
The Australian Dollar has found support from a softer USD and expectations of a potential RBA rate hike in November. Rabobank upgraded its 3-month AUD/USD forecast to 0.71, reflecting optimism amid shifting monetary policy expectations.