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ASX this week: Australia's credit rating on the radar

ASX this week: Australia's credit rating on the radar

Federal Treasurer Scott Morrison forecast a narrower budget deficit and slower economic growth for the 2017 financial year, as the government released its mid-year outlook report.

Australian shares fell last week, with the S&P/ASX 200 index dropping 0.5% over five days to 5,532.9.

On Friday:

  • Brent oil increased 2.2% to US$55.21 a barrel; up 1.6% for the week
  • WTI crude gained 2% to US$51.90 a barrel; up 0.8% for the week
  • Iron ore with 62% content delivered to Qingdao, China, was little changed at US$81.49 a dry metric tonne; down 0.2% for the week
  • Spot gold added 0.6% to US$1,134.88 an ounce; down 2.2% for the week
  • Australian dollar traded at 73.04 US cents, tumbling 1.9% over the week; the currency strengthened 0.1% to 73.12 US cents at 12:34pm Sydney time today

What to watch this week

The Federal Government released the Mid-Year Economic and Fiscal Outlook report (MYEFO) at 12:15pm today, where Treasurer Scott Morrison predicted a slight improvement in the budget deficit for the 2017 financial year (FY17).

Morrison forecast today an underlying cash deficit of $36.5bn, compared with a deficit of $37.1bn projected in the May budget. He kept his view that the government would return to budget surplus in 2021.

The government lowered its economic growth forecast for FY17 to 2% from 2.5% in May, in line with comments from the Reserve Bank of Australia (RBA) two weeks ago.

The MYEFO provides updates on the government's revenue and expenses since the release of the budget, apart from the country's outlook. The RBA flagged on 6 December that Australia's economic expansion may slow by year-end before picking up in 2017.

Before the MYEFO was released, there had been media reports discussing whether the country could hold onto its AAA credit rating. A credit rating indicates the likelihood of an individual, organisation or sovereign governments paying back debts. Australia is one of a few countries in the world that hold the AAA rating, the top credit rating.

Following Morrison's statement, Fitch ratings agency kept its AAA rating for Australia, saying the budget outlook was consistent with its rating, according to a Reuters report.

The Australian dollar rose to 73.12 US cents at 12:34pm, 0.1% higher than last Friday's close, according to Bloomberg data. The currency has weakened 1% so far this month.

Meanwhile in the US, the Electoral College votes on Monday for the country's next president. President-elect Donald Trump will be inaugurated on Friday, 20 January 2017.

Stock movers

Below are the five best and worst-performing ASX 200 stocks for the week ended Friday, 16 December.

Company/Index

ASX code

Weekly price change

NextDC

NXT

+14.6%

APN Outdoor Group

APO

+14.3%

Aconex

ACX

+12%

Seven West Media

SWM

+10.9%

Syrah Resources

SYR

+10.9%

S&P/ASX 200

XJO

-0.5%

Saracen Mineral Holdings

SAR

-13.9%

Mayne Pharma Group

MYX

-15%

Sky Network Television

SKT

-15.3%

St Barbara

SBM

-17.9%

Resolute Mining

RSG

-22.5%

Past performance is not a reliable indicator of future performance. Source: Bloomberg

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. The inclusion of companies in this article does not constitute a recommendation and it’s vital to remember that the value of shares in any company can fall as well as rise, which means you could lose money by investing in them. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.