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Review of Australia's Rating Fuels Economic Uncertainty

May 29, 1989|From Reuters

SYDNEY, Australia — The Australian government is coming under fire from the financial community and voters unhappy with an economic policy they fear has gone badly awry.

An announcement Friday by the credit agency Moody's that it might downgrade Australia's rating because of concerns about its huge debt load and continuing trade deficits could not come at a worse time for the Labor government.

Mortgage interest rates of 17%, a direct result of a year-long monetary squeeze by Treasurer Paul Keating, have alienated thousands of voters and propelled the new-look opposition coalition to a healthy lead in the opinion polls.

A series of poor economic figures, which has led to a sharp fall in the Australian dollar, is likely to continue the downslide Wednesday when figures outlining the country's debt problem are released.

Analysts expect net foreign debt to rise to more than $75 billion for the first time--equal to $4,700 for every Australian or about 31% of the value of gross domestic product.

"A . . . concern is the high and growing level of foreign-currency debt which makes the country vulnerable to interest rate and exchange rate movements," Moody's said in a statement saying it was considering a possible downgrading of Australia's Aa1 rating, the second highest granted.

The Moody's announcement lopped another 1.5 cents off the value of the dollar in about 90 minutes. The currency, quoted at 74.3 cents over the weekend, will come under pressure when Asian markets open today, dealers said.

Moody's is reviewing about $30 billion of government debt. A downgrading would increase the government's costs of borrowing.

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