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Economy gets big tick


Peter Martin

BlackRock's Steve Miller.

BlackRock's Steve Miller. Photo: Andrew Quilty

Months after Labor's mining tax, its carbon tax and its fourth successive budget deficit, Australia has been given the tick of approval by the world's biggest fund manager.

BlackRock is one of the world's most important buyers of government bonds, investing $US3.7 trillion worldwide. It says Australia's carbon tax and the mining tax have had at most a "marginal" impact on perceptions of the country's risk. More important has been the government's success in shrinking its budget deficit.

The fund manager's new sovereign risk update ranks Australian government bonds as the world's seventh least risky, up from 10th least risky three months ago.

No other nation has managed to jump three places in the latest survey. The finding is at odds with a claim made by federal Coalition Treasury spokesman Joe Hockey last August that Labor was "adversely impacting Australia's sovereign risk profile".

BlackRock's Australian head of fixed income, Steve Miller, said Australia's position was "exceedingly strong" and strengthening.

"The plain fact is, compared to the rest of the world, and this is what we are doing, Australia's public debt position is very, very strong.

Whether you are looking at budget balance or public debt to gross domestic product, whichever way we look at it, Australia comes out exceedingly strong."

The new BlackRock survey rates the governments of Norway, Singapore, Switzerland, Sweden, Finland, Canada, Australia, Taiwan, Germany and Chile as the 10 safest to lend to.

The United States is in the next 10 along with New Zealand and China, which have each moved up two places.

At the bottom, in positions 40 to 48 are Spain, Argentina, Ireland, Italy, Venezuela, Egypt, Portugal and Greece.

Japan and South Africa have each slid two places to 35 and 36.

Acting Treasurer Penny Wong welcomed the report as an "endorsement of Australia's strong public finances in the face of global headwinds".

A spokesman for Mr Hockey said the reality remained that business leaders had "expressed serious concern about the chopping and changing of government policy, the uncertainty of the taxation environment and the toxic relationship Canberra has with many members of the business community".

"Unquestionably, eight changes to the carbon tax, five versions of the mining tax, unexpected changes to business taxation, and the four largest deficits in Australia's history impacts on Australia's attractiveness as an investment destination," the spokesman said.

Speaking in reference to the interest rates Australia needs to pay to borrow money, Mr Miller said: "All other things being equal, this [the risk update] and the things that brought it about will put further downward pressure on bond yields." He said it would also make it easier for Australian state governments to borrow money.

The BlackRock calculation accords with those of the world's top three credit ratings agencies, which have given Australia their highest AAA rating. But it is a more recent calculation and the improvement reflects recent developments.

"The impact of the mining tax and the carbon tax would be marginal," Mr Miller said.

"We look at ability to pay and willingness to pay. Australia's budget position has improved. It has never defaulted. It has low debt by international standards."

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  • Now wait for all the Liberal deniers. BlackRock, just like the IMF, are sponsored by the ALP, of course.

    Date and time
    January 17, 2013, 8:18AM
    • Shrinking the Government Deficit ? how much better we would have rated if the Labour party hadn't got their mitts on our money and wasted it

      Date and time
      January 17, 2013, 8:48AM
    • @Jon.........anyone who says a positive thing about Australia is part of the "Conspiracy".

      Date and time
      January 17, 2013, 9:02AM
    • @ Bazza
      Or has a vested interest ?

      Date and time
      January 17, 2013, 9:11AM
    • @Bazza

      Don't cover a conspiracy up with a conspiracy .... it's the Abbott team !

      J. Fraser
      Date and time
      January 17, 2013, 9:12AM
    • For all the rusted-on Labor voters who jumped at a chance to mis-interpret, please re-read what BlackRock is saying - "We look at ability to pay and willingness to pay". BlackRock is only saying they are confident they will be repaid by the Australian government. How is that an endorsement of Labor's economic track record? Sure, the budget deficit will improve from a $40bn deficit (when Australia enjoyed its best ever terms of trade) to say, maybe $10bn in 2012/13. Still need to borrow $10bn. BlackRock does not care how Labor has wasted billions of borrowed money, has no idea how to repay the debt other than to continue to borrow, including billions just to service the interest. Given the debt-free position handed to Labor by the Coalition, of course BlackRock is confident Australia will not default as it still has capacity to borrow even further. Meanwhile, what has taxpayers got for all the money borrowed by Labor? Spare me the "Labor saved Australia from the GFC (which was only the North Atlantic FC)". It was China's stimulus program and Australia's natural resources.

      Date and time
      January 17, 2013, 9:12AM
    • GC

      Deep in recession along with all the other countries that did nothing.

      Date and time
      January 17, 2013, 9:22AM
    • Swannie hasn't been bad for the economy.

      But Labor voters want more from them than that. Taking benefits from single mothers will cost them more votes than they reckoned. I personally think that was what sank Howard.

      Mothers are the hearth. Take away their pots and pans and you'll soon see the consequences.

      this is why I vote green
      Date and time
      January 17, 2013, 9:24AM
    • @GC

      "how much better we would have rated if the Labour party hadn't got their mitts on our money and wasted it"

      Well since the IMF found that Howard's government in 2005 - 2007 was the most wasteful Australian Government in the past 50 years, and since 16 members of the Opposition's front bench were members of that Government, and since Abbott has promised a return to the same fiscal settings as Howard, then objectively we'd be rated a lot, lot worse.

      But that's just the opinion of conservative international economists. I'm sure an anonymous commenter on SMH knows better.

      Date and time
      January 17, 2013, 9:37AM
    • hbloz, Blackrock has a substantial business in Australia. They know as well as you and I what has been happening in Australia.

      Date and time
      January 17, 2013, 9:42AM

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