Fitch reaffirms Australia’s AAA credit rating
Make us a preferred source
Make us a preferred source on Google
The news: Australia’s AAA credit rating has been reaffirmed by global ratings agency Fitch, which acknowledged the Albanese government’s efforts to pay down government debt and boost productivity in its latest report. But the ratings agency has flagged challenges ahead.
The numbers: Australia is one of nine countries to be rated AAA across all three major credit rating agencies, the others being Moody’s and S&P.
Fitch expects Australia’s GDP growth to accelerate from 1.1% in 2024 to 1.8% in 2025, 2.1% in 2026 and 2.4% in 2027.
The ratings agency also forecasts that the government fiscal deficit will narrow to 2.7% in FY26, from an estimated 2.9% in FY25, with an increase in the federal deficit in FY26 and FY27 expected to be offset by a decline in aggregate state government deficits.
Government debt is expected to peak at 50.9% of GDP in FY26, up from Fitch’s estimated 50% in FY25, before declining to 50.2% by FY30. However, the ratings agency flagged that this is on the high side compared to the AAA median of 39.7%.
Fitch also forecasts that inflation will remain at the upper end of the 2%-3% target band and expects the RBA to cut the cash rate by 25 basis points in the first half of 2026 to a “terminal rate” of 3.1%.
The context: Despite the positive tone, Fitch highlighted that “structural spending pressure presents risks to our fiscal outlook”. It flagged the NDIS, aged care, health and defence costs in particular.
In a statement, Minister of Finance Katy Gallagher highlighted that the Albanese government delivered two budget surpluses in its first two years in power but acknowledged that “structural pressures are intensifying rather than easing”.
What they said: “We are realistic about the challenges facing our economy including growing global uncertainty, but our AAA rating is further proof Australia is coming at these challenges from a position of genuine economic strength,” Gallagher said in a statement.
The sources: Fitch rating action commentary, Minister for Finance Katy Gallgher statement
