S&P Global Ratings upgraded its outlook on Australia's coveted "AAA" sovereign rating to stable from negative on Monday (Jun 7), citing the country's swift economic recovery from the pandemic-driven recession.
Australia's A$2 trillion (US$1.55 trillion) economy has rebounded sharply to above pre-pandemic levels thanks to the country's successful handling of the COVID-19 pandemic together with massive fiscal and monetary stimulus.
S&P said it was more confident now that the government's fiscal deficit will narrow toward 3 per cent of gross domestic product during the next two to three years after reaching a 10 per cent deficit in the year ending June 2021.
"The government's policy response and strong economic rebound have reduced downside risks to our economic and fiscal outlook for Australia," S&P said in a statement.
"As a result, we are revising the outlook to stable and affirming our 'AAA/A-1+' long- and short-term local and foreign currency ratings."
Australia is one of just nine countries in the world to boast an "AAA" credit rating from all three major ratings agencies.
S&P added its concern over Australia's high level of external and household debt has been moderated by the country's strong track record of managing major economic shocks.
Australia announced strict physical distancing rules in late March 2020 to curb the coronavirus pandemic, forcing businesses from retailers to cafes and restaurants to down shutters while leading hundreds of thousands to queue up for welfare payments.
But the small and open export-driven economy has since rebounded by keeping virus numbers in check, allowing businesses to reopen with confidence.
Australia is among a handful of countries globally that can boast an economy that’s larger now than before the pandemic, according to Deloitte Access Economics.
On average, Australia's rich world peers are 2.7 per cent smaller than they were before the pandemic, Deloitte's research found, with the UK shrinking almost 9 per cent, the EU contracting by 5 per cent and the US 1 per cent smaller.