(AFP) – Aug 5, 2011
SYDNEY — Australia's prime minister warned against over-reacting to the Standard & Poor's downgrade of US debt, pointing out that the two other key agencies still rated US Treasuries at top grade.
S&P "had been signalling for some time that unless they saw a certain figure of budget cutbacks out of the discussion that there's been in Washington about the American budget and fiscal consolidation, that they were intending to do that downgrade," Prime Minister Julia Gillard said on Saturday .
"At the same time, the other two major ratings agencies, Moody's and Fitch, continue to have the American economy rated at AAA. So I think people just need to look at all of the facts."
With global markets already in turmoil, S&P cut the US rating late Friday from its top-flight triple-A one notch to AA+ and added a negative outlook.
Australian stocks plunged 4.00 percent Friday, the worst losses in a single session since the height of the 2008 financial crisis, but Gillard insisted Saturday the country's economic fundamentals were strong.
"People should look with confidence at our economic credentials and fundamentals, and people should look with confidence at the ability of this government to deal with global instability," Gillard said.
"We came out of the global financial crisis without having gone into recession."
Friday's losses on the markets rattled the many Australians who have their retirement savings invested on the stock exchange.
"People did see impacts on their super(annuation) funds during the days of the global financial crisis and many Australians will be looking now on impacts here on super funds and on their direct share investments," Gillard said.
Treasurer Wayne Swan said Australia's own "gold-plated AAA-rating is safe and secure", with net debt to peak at less than one-tenth of that of the major advanced economies and Canberra's budget to return to surplus within two years.
"Our fiscal situation couldn't be more different from the United States," he said.
Mining-driven Australia was the only advanced economy to avoid recession during the downturn, due to resilient Asian demand for commodities.
Gillard said booming China would again shield it from the worst.
"When we look at our own economy, I think people understand now that a quarter of our exports go to China with its huge demand for our resources," the prime minister said.
Australia's central bank slashed its 2011 growth forecast from 4.25 percent to 3.25 percent Friday, warning that consumer spending had slowed and the economy was recovering more slowly than hoped from summer floods and cyclones.
Global risks were also growing, the Reserve Bank of Australia said.
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