Australia’s AAA rating could drop to AA if the debt level becomes above average. In this short video, Brendan Rynne, Partner and Chief Economist, KPMG, explains what that could mean for national interest payments down the track.
The debt position for Australia has been increasing quite substantially since 2008 (post GFC).
What we’ve been able to show is our current debt levels are just a little bit below average of other AAA-rated countries. And, with the expected deficit that is going to occur within the next few years, it is most likely Australia is going to be above average for AAA-rated countries in a couple of years’ time.
That’s going to put some pressure on our AAA rating, and if we were to fall down to a AA rating the cost will be about 30 basis points from an interest cost perspective. Applying that to our total debt levels, both at a Commonwealth and State level, will mean an additional $1 billion worth of interest payments each year.
KPMG examines Australia’s debt, credit rating, solutions to the problem and what it means for the future of Australia’s economy.