1295373952atoNM5Global credit rating agency Standard & Poor’s (S&P) expects Australian economic growth will remain close to trend in coming years, as public debt peaks at a low level.

But S&P, which rates Australia at a top ranking triple-A with a stable outlook, says the local economy does have vulnerabilities.

“The economy holds a large amount of offshore debt, households retain substantial debt because of high house prices and its banks are reliant on foreign investor funding,” associate director Craig Michaels said in a statement.

“Although these weaknesses may pressure the sovereign ratings in a downside scenario, they appear to be largely mitigated for now.”

The agency’s new report on Australia, released on Wednesday, suggests several plausible – albeit unlikely – scenarios that could expose the nation’s vulnerabilities.

For example, a sudden shift in foreign investor sentiment or a sharp slowdown in China’s economic growth, coupled with a vulnerable household sector, could significantly worsen the economic and fiscal position.

“Our base case is that Australia’s economic growth will remain close to trend over coming years,” Mr Michaels said.

“Australia’s wealthy and open economy withstood the global financial crisis better than most other developed economies, and we expect public debt to peak at a low level before gradually declining.”


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