In a statement released earlier this week, Moody’s Investors Service affirmed its Aaa local and foreign currency rating on the Australian dollar — while tipping its hat to the strong Australian economy.
The statement read, in part: “Australia’s economic strength is classified in Moody’s rating methodology as very high, based on the country’s size, economic diversity, the performance of the economy during the past two decades, and favorable long-term growth prospects.
As one of the world’s most advanced economies, the country has not only a significant natural resources sector — including minerals, hydrocarbons, and agriculture — but also well-developed manufacturing and service sectors.”
Despite the GFC, no recession in over 20 years
“While Australia’s income per capita falls slightly below the median for Aaa-rated sovereigns, its rate of economic expansion has outpaced all its peers with the exception of Singapore, although Australia’s growth has been much less volatile,” Moody’s statement went on to say.
“Over the past six years, Australia did not experience a recession — although it did post a quarterly contraction in 2008 — unlike most advanced economies.”
A recession is defined as two quarters of economic contraction – and Australia hasn’t experienced a recession in some 22 years, according to the Australian Bureau of Statistics.
In all, it’s another reminder to ASX investors to keep their focus on the long term, rather than day-to-day market jitters such as the near 2% drop in the S&P/ASX 200 index (^AXJO) (XJO.AX) just yesterday. Such volatility in the market is a simply a fact of life, while Australia’s long-term future looks bright indeed.
The takeaway for investors
From BHP Billiton (BHP.AX), now dipping toward the $30 mark, to oil and gas plays from Woodside Petroleum (WPL.AX) to Santos (STO.AX), there’s no question the ASX offers investors a chance to invest in Australia’s natural resources sector. Investors also have the choice of well positioned domestic businesses with widely recognized brands such as Telstra (TLS.AX).
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Motley Fool contributor Catherine Baab-Muguira does not own shares in any company mentioned in this article.