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S&P changes Australia's outlook to negative over coronavirus risks

S&P Global Ratings affirmed Australia's unsolicited long- and short-term sovereign credit ratings at AAA/A-1+ and revised the outlook to negative from stable over fiscal and economic risks that the country is facing due to the coronavirus pandemic.

The outlook revision followed a series of large stimulus packages unveiled by the Australian government to support the economy in a bid to stem the impact of the pandemic. The Reserve Bank of Australia also cut interest rates to a new low of 0.25% and announced a move to quantitative easing.

The rating agency said it expects a significant deterioration of the Australian government's fiscal headroom at the AAA rating level as a result of a potential economic recession for the first time in almost 30 years. It projects the general government deficit to average about 7.5% of GDP between fiscal years 2020 and 2021 before narrowing sharply. However, S&P noted that the budget deficits are likely temporary and do not represent a structural weakening of Australia's fiscal performance.

The rating agency said it could lower Australia's rating within the next two years if the economic damage caused by the pandemic is more severe or prolonged than expected, delaying the repair of the government's balance sheet.

READ MORE: Sign up for our weekly coronavirus newsletter here, and read our latest coverage on the crisis here.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.