Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Hansard source

I thank the honourable member for Boothby for his question. I can tell him that today Standard and Poor’s reaffirmed Australia’s foreign currency sovereign credit rating at AAA, which is the top credit rating that can be given. Why does it matter what a sovereign credit rating is? It matters for this reason: if the sovereign rating is the ceiling, all private borrowers work back from that. If the sovereigns are downgraded in credit ratings, banks and other financial institutions that borrow are also downgraded. They do not go higher than the sovereign. At AAA for foreign currency, Australia is now at the top of the international ratings agencies. Standard and Poor’s said:

Australia has one of the best fiscal positions globally, distinguished by high funding of government pension liabilities and low gross debt estimated to be 4.4 per cent of GDP.

Of course, in net terms we have no debt. That is because the government has paid off Labor’s $96 billion of net debt. The high funding of government pension liabilities is a consequence of this government establishing the Future Fund, which is now funding liabilities into the future.

It was not always the case that Australia had a AAA credit rating on foreign currency sovereign issues. We were first downgraded in 1986 when the then Labor Treasurer talked of this country becoming a ‘banana republic’. And it bears remembering back to those days—I do not think anybody would suggest that Australia is a banana republic today.

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