So why exactly was Malcolm Turnbull knifed again?

Ratings agency Standard & Poor’s has joined the ranks of those wondering about that in its latest assessment of the Australian economy — and in doing so, poked numerous doomsayers in the eye.

Early this year, we did a survey of the ranks of the doomsayers and some of their more hilariously wrong predictions of property crashes and recessions in Australia. It turns out, things are so awful in Australia, Standard & Poor’s restored Australia’s credit rating to the highest level — AAA with a stable outlook — and in doing so effectively endorsed the economic policies of the Turnbull government. As Crikey noted after Turnbull was betrayed by his colleagues, his economic and fiscal record, except on wage stagnation, was far better than Tony Abbott’s.

That means we are again one of the few global economies with AAA stable ratings from the major rating agencies. S&P lowered Australia’s rating to “negative outlook” in 2016, endangering the rare triple AAA status we secured on Wayne Swan’s watch; that threat has now passed, and means Australia has a higher standing than the US, which has been AAA negative since 2011.

“We expect the general government fiscal position to return to surplus by the early 2020s, as the central government’s continued focus on fiscal prudence turns higher revenue collection into better budget performance,” S&P said in a research note. “We expect steady government revenue growth supported by the strong labor market and relatively robust commodity prices, to be accompanied by expenditure restraint. 

“We also expect property prices to continue their orderly unwind, and that this slowdown won’t weigh heavily on consumer spending and the financial system’s asset quality. We expect large infrastructure spending at the state government level to likely keep the general government balance negative till fiscal 2021,” it said.

A steeper and larger downturn in the housing market could place the rating at risk, or if the budget surplus is again pushed out. “Australia’s weak external position means that its other sovereign credit factors, including the fiscal factors, need to be strong to keep the sovereign rating at the highest level on our scale,” S&P said. “A stronger fiscal position would also be a strong buffer to absorb the consequences of an abrupt weakening of the housing market and the vulnerabilities that event could bring to financial stability.”

It’s the best external endorsement the Australian economy has had in a while. No wonder the Liberals can’t explain why they got rid of Turnbull.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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