The Australian Government's (Department of Treasury) Mid-year Economic and Fiscal Outlook (MYEFO) is due on Monday 19 December 2016 (Australia time)
I've been posting on it more than usual:
- Australia press: 'AAA could go at any time'
- ANZ on Australia's credit rating 'in the spotlight as MYEFO approaches'
- Australian Treasurer 'reviewing' tax to raise more revenue
If you've been ignoring those posts I can't blame you. Dull as dishwater this stuff.
But, if you are trading the AUD its something you might like to get some background on.
The basic gist is that Australia's AAA rating is at risk, and the MYEFO could well be the trigger for a downgrade.
The issue ratings agencies have with the AAA is, in very brief, the delay in getting the Australian government budget into surplus; the target date to achieve surplus keeps getting pushed back into the future.
The arguments go around and around about the deficit and whether the AAA rating loss is such a big deal anyway. I'll leave that to others to debate, the point is the potential downgrade is something for traders to be aware of.
The perception is a downgrade of Australia's credit rating will lower the value of government bonds, will boost borrowing costs & make budgetary pressures worse.
Again, there is plenty of argument about this, and again I'll leave that debate to others - it's perception that will drive the response of the currency.
A downgrade of the rating should be bearish for the AUD. (ACT traders, in particular please note my use of the word 'should' in that sentence. You know what to do.)
