... So that You may be kept informed

Budget doesn't threaten Australia's AAA rating, S&P says

12 May 2009 8:23 PM

SYDNEY, May 12 AAP - The federal government's budget for the next financial year doesn't threaten Australia's triple A rating as the country's finances remain sound, ratings agency Standard & Poor's says.

S&P said its highest rating for Australia's sovereign credit rating wasn't threatened as the public sector finances supported the rating and compared favourably with the country's peers.

"We believe the deficits and associated borrowings do not alter the sound profile of the country's public finances," S&P credit analyst Kyran Curry said in a statement.

"This is underpinned by the strength of the government's balance sheet, which provides flexibility to absorb debt levels and cyclical deficits of this nature."

The government has forecast an underlying cash deficit of $57.59 billion for 2009/10 - representing 4.9 per cent of gross domestic product (GDP) - following a deficit of $32.11 billion in 2008/09.

The forecast was in line with financial market expectations and represents a blow out of $22 billion in the budget since the government's last forecast in February, and will likely be the biggest deficit on record.

Mr Curry said the budget had a plan for returning to surplus and the delivery of that plan would play a part in maintaining the triple A rating.

S&P said the biggest risk to the triple A rating was a significant weakening in the credit quality of the country's banking sector.