Australia, known by various nicknames like “the Great Southern Land” and “the Lucky Country,” stands out not only for its stunning natural wonders and landscapes but also for its exceptional financial standing. The country holds the prestigious Triple A rating, placing it among a select group of nations with the highest creditworthiness. As of 2023, Australia maintains this coveted status with a stable outlook.
Australia’s Triple A rating is built on solid foundations, including its high income per capita and robust institutions. Remarkably, the country experienced nearly three decades of continuous economic growth before the Covid-19 pandemic struck, and its resilience continues to shine amidst global shocks. The recent strong performance of public finances further supports its Stable Outlook, exceeding rating agencies’ expectations.
A key contributor to Australia’s AAA rating is its strong banking sector. Credit rating agencies commend the banks for their strong capital positions, resilient profitability, and sound underwriting standards. With a mere 0.7% non-performing loan ratio, the banking sector is well-prepared to manage risks effectively.
While the country’s external finance profile may trail behind some peers, Australia has been making strides with sustained current account surpluses. The surplus is projected to remain relatively stable at 1.4% of GDP in 2023, thanks to robust goods and services exports offsetting higher income payments. Despite a net external debt of around 47% of GDP (higher than the AAA median of 22% net creditor position), the risks associated with external financing are limited.
Australia’s commitment to Environmental, Social, and Governance factors (ESG) is evident with its high World Bank Governance Indicators (WGI) ranking of 91.2. The country’s Political Stability, Rights, Rule of Law, Institutional Quality, and Control of Corruption all received a noteworthy ESG Relevance Score (RS) of ‘5[+]’, indicating strong governance practices.
Australia’s financial reputation stands tall on the global stage, thanks to its exceptional credit rating and prudent financial management. The country’s remarkable journey to maintain its Triple A rating serves as an inspiration for other nations, demonstrating how a strong economy and sound governance can pave the way for continued financial success.
As we explore more about countries with top credit ratings, stay tuned for the next installment in our series as we uncover more intriguing insights into the world of credit ratings.
It is worth noting that the credit rating view expressed in this write-up was adapted and not that of DataPro. Nonetheless, countries should learn from Australia’s credit strengths; particularly Political Stability, effective Rule of Law as well as Regulatory and Corruption Control.