Australia’s coveted AAA credit rating came under a cloud on Wednesday as the country’s parliament returned to pass an emergency 130 billion Australian dollars ($80bn) stimulus package to help cushion the blow to the economy from the coronavirus pandemic.
Australia’s government has so far pledged 320 billion Australian dollars ($197bn) in fiscal support as the coronavirus pandemic shuts companies and leaves many unemployed.
“The COVID-19 outbreak has dealt Australia a severe economic and fiscal shock,” rating agency S&P said as it lowered the outlook on the country’s AAA sovereign debt rating to “negative” from “stable”, raising the likelihood of a future downgrade.
“We expect the Australian economy to plunge into recession for the first time in almost 30 years, causing a substantial deterioration of the government’s fiscal headroom at the AAA rating level.”
A triple-A credit rating is given to only a select group of countries with the strongest finances in the world. The rating means a country can easily meet its financial commitments and have the lowest risk of default.
S&P’s decision came as a pared-back version of Australia’s parliament votes on the government’s third tranche of fiscal measures on Wednesday. Fewer-than-normal legislators were present for the one-day sitting to minimise the risk of the virus spreading.
In his address to parliament, Prime Minister Scott Morrison said legislators were acting to “protect Australia’s sovereignty”.
“When Australian lives and livelihoods are threatened, when they are under attack, our nation’s sovereignty is put at risk, and we must respond,” he added.
The support measures come as economists predict the worst recession in Australia’s history, with the unemployment rate almost doubling to near 10 percent. The Reserve Bank of Australia on Tuesday predicted a “very large” economic contraction in the current quarter.
Restrictions on people movement and gatherings to curb the spread of infection have forced many businesses in the hospitality, retail, transport and education sectors to shut. Businesses that remain open face falling sales and increasing operational restrictions.
Australian police said they will ensure social distancing and travel restrictions are enforced during the upcoming long Easter weekend as the national death toll from the coronavirus reached 50.
Health Minister Greg Hunt warned abandoning social distancing rules and stay-at-home advice over the long weekend would undo the success Australia has had in fighting the virus.
“The virus doesn’t take a holiday,” he told the Ten Network.
The total number of cases across Australia is creeping towards 6,000, although the pace of new infections has slowed dramatically in the past week.
The early success in controlling the spread of the virus has fanned speculation some of the mobility restrictions could be eased from the beginning of May.
The New South Wales (NSW) state premier Gladys Berejiklian said in a televised briefing in Sydney that “there could be a chance if the health experts deem it appropriate”.
However, she warned lifting restrictions could lead to a second wave of infections. NSW is the country’s worst-affected state accounting for almost half the total infections.
“Every time you relax a restriction, more people will get sick. More people will die. And it’s a horrible situation to be in, but they’re the choices and we need to be up-front about that.”