Salomons to Aust, defence

Press, 30 May 1989, Page 18

Salomons to Aust, defence

NZPA-AAP Brisbane A review of Australia’s credit rating by Moody’s Investors Service was not justified, the New York-based merchant bankers, Salomon Brothers Inc., said.

Moody’s review is “an arbitrarily timed response to economic problems” that have existed for at least two years, Salomon Bros said. Moody’s on Friday said it was reviewing its AAI rating for Australia, focusing on issues such- as the uncertain outlook for commodities, the pace of industrial change, and political factors constraining fiscal, monetary and wages policies.

The review comes as the Acting Federal Treasurer, Mr John Dawkins, yesterday called for an end to “hysteria” about the Australian economy.

Salomon Bros said Moody’s ignored the fact that the Australian Government has “maintained one of the most responsible fiscal policies of any of the developed coun-

tries in the past few years” "The review does not reflect the fact that Australia’s sovereign debt has decreased, even if private external debt — a result of a substantial voluntary inflow of investment — has increased at the same time,” Salomon Bros said.

“We disagree with Moody’s action and do not think it is justified despite certain — not necessarily new — problems confronting the Australian economy. “Australia is facing unsustainably rapid real economic growth rates spurred by private demand, inflation is higher than in its main trading partners and its current account deficit has widened in recent months,” Salomon Bros said.

“Nevertheless, the Australian Government has run budgetary surpluses since the 1987/88 fiscal year and has predicted a surplus of nearly sAusts.s billion or 1.4 per cent of GDP for the 1989-90 fiscal period.”