MNI: S&P Ups Australia AAA Rtg Outlook To Stable From Negative

     SYDNEY (MNI) - Standard & Poor's has upgraded the outlook on Australia's

AAA rating to stable from negative, citing expectations of a return to surplus

by early 2020 and an orderly decline in housing prices that won't weigh heavily

on consumer spending.

     Below are key excerpts from S&P's statement Friday:

     --"We expect the general government fiscal position to return to surplus by

the early 2020s, as the central government's continued focus on fiscal prudence

turns higher revenue collection into better budget performance. We view the

government as having significant revenue flexibility to achieve this based on

its track record of raising general government revenue faster than the growth of

nominal GDP."  

     --"We are revising our outlook on Australia to stable from negative and

affirming our 'AAA' long-term and 'A-1+' short-term ratings." 

     --"The stable outlook reflects our expectations that the general government

fiscal balance will return to surplus by the early 2020s. We expect steady

government revenue growth supported by the strong labor market and relatively

robust commodity prices, to be accompanied by expenditure restraint. We also

expect property prices to continue their orderly unwind, and that this slowdown

won't weigh heavily on consumer spending and the financial system's asset

quality."

     --"We could lower our ratings if we consider that it is unlikely for the

general government balance to return to surplus over the next five years.

Australia's weak external position means that its other sovereign credit

factors, including the fiscal factors, need to be strong to keep the sovereign

rating at the highest level on our scale. A stronger fiscal position would also

be a strong buffer to absorb the consequences of an abrupt weakening of the

housing market and the vulnerabilities that event could bring to financial

stability."

     --"While our base case is for a soft landing, our ratings could come under

pressure if house prices fall sharply and increase risks to fiscal accounts,

real economic growth, and financial stability."

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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