S&P has reaffirmed Australia’s AAA credit rating for now, but has warned a number of vulnerabilities exist.
One vulnerability is a housing correction due to the “substantial [household] debt mainly due to elevated property prices” in Australia.
The report indicated “The sustainability of high household debt levels has not been tested in an environment of high unemployment for a long time.”
“Australian house prices, relative to household incomes, are also elevated. While there has not been a build-up of aggregate excess supply, the housing market continues to appear somewhat vulnerable to a downturn, in our view.”
Other concerns include Australia’s increasing reliance on overseas funding and Australia becoming increasingly interlinked with China’s growth and business cycle.
» S&P gets positive on Australia – MacroBusiness, 27th February 2013.
» AAA rating vulnerable to debt, house prices: S&P – The Australian Financial Review, 27th February 2013.
» Economy strong, but housing vulnerable: S&P – The Sydney Morning Herald, 27th February 2013.
» S&P rating safe, but foreign debt a worry – Yahoo 7/aap, 27th February 2013.
Posted in Australian economy, Australian Housing, China Housing | 6 Comments »