Moody's: Australia resilient to commodity price declines, but external risks linger

The US-based ratings agency, the Moody’s Investor Service, published a latest report on the Australian economy, in wake of the recent commodity price declines.

Key Quotes:

“Australia will be the fastest growing Aaa-rated commodity exporting economy in 2016”

“A reflection of its resilience to shocks”

“Export volumes have increased strongly despite falls in metals prices”

“The services sector has benefited from a weaker domestic currency”

“Trade and current account deficits spanning several decades reflect a reliance on external financing, and leave both countries vulnerable to shifts in investor sentiment”

“But the robustness of Australia's institutions, deep capital markets and low foreign currency debt mitigate the risk of any abrupt tightening in financing conditions”

“Government debt will rise as a result to around 41% of GDP in 2017 -- higher than in New Zealand and Norway”

“But that will still be much lower than in Canada and some other Aaa-rated sovereigns”

“Nonetheless, the intrinsic financial strength of Australia's banks -- which is somewhat higher than in Canada, New Zealand and Norway -- lowers the potential cost of government support to the banking system in the event of stress”