Moody’s warns of rating pressures

MOODY’S has confirmed it sees the coalition’s narrow election win as credit negative for Australia’s triple-A rating.

Moody’s has joined S&P in sounding a credit warning for Australia.

MOODY’S has confirmed it sees the coalition’s narrow election win as credit negative for Australia’s triple-A rating, making efforts to cut the budget deficit even more difficult.

Fellow ratings agency Standard &Poor’s has already placed Australia’s credit rating on negative outlook, and Moody’s said on Thursday the government’s small majority challenges its ability to take action against a backdrop of lower corporate profits, falling commodity prices and muted wage growth. “Despite broad political consensus around the desirability of returning the budget balance to surplus, authorities have had difficulty implementing specific measures to achieve this,” Moody’s said in a statement.

“The coalition’s now-narrower majority threatens to add to these challenges.” The agency also flagged the importance of house prices, with household debt high by both historical and international standards.

“Developments in house prices and their impact on households’ spending and saving decisions will affect domestic growth, financial conditions and the health of banks, and in turn will be important for the sovereign’s creditworthiness,” Moody’s said.

S&P a week ago warned there is a one-in-three chance Australia’s rating could be lowered within two years if measures to improve the budget position are not passed by parliament.