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Copy link Copied Copy link Copied Subscribe to gift this article Gift 5 articles to anyone you choose each month when you subscribe. Already a subscriber? Login Ratings agency S & P this week warned that Australia’s AAA credit rating – something shared with only 10 other countries – may be “at risk” as a result of additional, unfunded spending promised by both sides of politics during the current election campaign, coming on top of “lax fiscal discipline” from “big-spending state governments”. Credit ratings are, inherently, somewhat subjective.
But they do matter. While the interest rates that the Australian federal, state and territory governments pay on the bonds they issue to finance their deficits ultimately reflect the collective judgements of investors in bonds, those judgements are in turn influenced by credit ratings. In particular, some investors – including many central banks – are restricted to holding only AAA-rated bonds in their portfolios.
And central banks are important investors in Australian government bonds. Copy link Copied Copy link Copied Subscribe to gift this article Gift 5 articles to anyone you choose each month when you subscribe. Already a subscriber? Login Follow the topics, people and companies that matter to you.
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