Australia is regarded as one of the world's safest borrowers, after a global ratings agency upgraded the country to the highest possible rating for its overseas borrowings.
Fitch Ratings upgraded Australia's foreign currency issuer default rating to AAA from AA+, joining Standard & Poor's and Moody's in giving Australia the highest possible rating.
The ratings upgrade reflected Australia's fundamental strengths, "including its high value-added economy, strong political, civil and social institutions and its flexible policy framework," said Art Woo, a director in Fitch's Asia Sovereign Ratings group.
Fitch also affirmed Australia's local currency rating of AAA with a stable outlook.
Fitch said it viewed Australia's low government debt-to-GDP ratio - 26.3 per cent of GDP in 2010/11 - as one of the standout strengths. In comparison, the median ratio in the AAA rating group was 55.7 per cent.
The ratings agency said the federal government was committed to getting the budget back to surplus by 2012/13, although that could be delayed by a further deterioration in global economic conditions.
Australia's external finances remained weak by AAA standards, although not the worst among its ratings peers, Fitch said.
The country's net external debt was 53.2 per cent of GDP in 2010 and the current account deficit is expected to remain sizable. That made Australia relatively sensitive to external financing stocks, compared with its peers, Fitch said.
As evidence, Australia's banking sector faced difficulties accessing the international wholesale funding market in late 2008/2009, the ratings agency said.
The commodity boom was helping Australia's growth rate, even during the financial crisis.
Fitch said the boom also posed risks, as a large downturn in key commodity prices would lead to a sharp reversal in the terms of trade.
Household debt was also high in Australia, after the run-up in housing prices over the past decade and a half.
House prices had been moderating since mid-2010, which should ease concerns that a large bubble had developed, Fitch said.
