By Gemma Daley
Sydney, Feb. 17 (Bloomberg) -- Australia won back the top foreign currency credit rating from Standard and Poor's that it lost 16 years ago, a reward for four government budget surpluses in five years and falling foreign debt.
The upgrade to AAA from AA+ puts Australia on a par with the U.S., the U.K. and Singapore. It comes almost four years after S&P last raised the rating. Moody's Investors Service gave the nation its top rank in October 2002. Australia has had a AAA local-currency rating from S&P since July 1992.
Treasurer Peter Costello used the announcement on the credit upgrade to increase pressure on opposition parties to allow the sale of the government's remaining 50 percent stake in Telstra Corp., which would allow him to almost wipe out government debt.
``What I say to the Senate is pass the legislation -- that's what I'm focusing on,'' Costello told reporters in Melbourne. `You've got this campaign of obstructionism in the Senate.''
The sale of the first half of Telstra, the nation's biggest phone company, in two offerings in 1997 and 1999 raised more than A$30 million ($17.8 billion) for the government. That money allowed Costello to repay government debt and produce four consecutive budget surpluses from 1997. Its budget fell back into deficit in 2002, though is estimated by Costello to be in surplus this year.
The sale of the second half of the phone company has since been stifled by opposition parties, which control the upper house Senate.
`Robust Growth'
``The reason the credit rating is higher is because of a very strong fiscal stance by the federal government and we would be looking for that to stay strong,'' Rick Shepherd, S&P's director of public finance ratings, said on a teleconference call.
``That stance has flown through to robust growth of the Australian economy during the past couple of years. Its rating puts it with countries like the U.S., U.K., Canada and Singapore and takes it from a group that includes New Zealand and Sweden.''
Canada in July last year was the last country to have its foreign currency rating upgraded to AAA by S&P.
Australia's economy has been growing at an annual rate about 4 percent the past two years.
``The government's net debt position is incredibly low,'' said Stephen Halmarick, co-head of economic and market analysis at Salomon Smith Barney/Citibank Ltd. ``This reflects the underlying strength of Australia's fiscal and external debt position.''
Payback Time
Costello estimates the government's debt will be reduced to A$34.5 billion in the year ending June 30, 2003, from A$96 billion when his Liberal-National party coalition won power in 1996. Government securities make up the debt and there is no outstanding foreign investment.
The government also estimates it can reduce its debt to A$1.7 billion ($1 billion) in fiscal 2004, or 0.2 percent of GDP, if it can sell Telstra.
Shares in Telstra were trading at A$4.34 at 2.10 p.m., Sydney time, valuing the government's stake at A$28 billion. The stock has lost 22 percent of its value the past year, prompting the government in November to delay selling its stake for 12 months, until the year starting July 1, 2004.
Currency Support
Costello welcomed the S&P upgrade. ``What this means is that if the government were to borrow it would be able to borrow at cheaper rates, but the government is not borrowing at present because we are repaying debt,'' he said.
The Australian dollar was trading at 59.20 U.S. cents. It earlier rose to 59.32 U.S. cents from 59.11 U.S. immediately after the S&P announcement.
``It's a reason to support the Australian dollar in the short- term,'' said Chris Loong, Sydney-based manager of foreign exchange hedging at AMP Henderson Global Investors, which has about $155 billion under investment. ``It certainly wasn't expected today.''
``Australia has one of the strongest fiscal positions,'' S&P sovereign credit analyst Ping Chew said in a statement. ``Thanks to modest general government surpluses, a large privatization period, net general government debt to GDP is projected to fall to 3 percent at year end 2003.''
States Upgraded
Government saving has not been matched by companies, Chew said. Net external non-government debt is forecast to be 48 percent of GDP by the end of 2003, the statement said.
``Current account deficits have averaged 4.3 percent of GDP during the past decade,'' Chew said.
Australia's trade deficit almost tripled in December to A$3 billion from A$1.1 billion the previous month.
S&P also raised the long-term foreign currency ratings on four Australian states and one territory to AAA from AA+.
The upgrades went to the states of New South Wales, Victoria, Queensland and Western Australia, plus the Australian Capital Territory, which administers the national capital of Canberra.