Australia’s Credit Beats Out U.S., Europe

It's kind of funny when you think about it Europe and America can't meet
their debts and still are reeling from the misbehavior of crooks in high
finance, and meanwhile the former penal colony of Australia is now seen as one
of the most trustworthy places to invest in the world. Australia was upgraded by
Fitch Ratings to the highest possible level AAA a few days ago and now owns
top marks from all three rating firms on top of its existing elite status with
Standard & Poor's and Moody's. Meanwhile, there are rumblings that Fitch
might go the other way on America and downgrade its sovereign debt to AA+ like
S&P did back in August. No knock is looming for U.S. credit, however, since
Fitch has said a downgrade likely wouldnt come until 2013 even if the status quo
continues. What's more, it's not just the European also-rans like Italy and
Greece that are embroiled in debt woes. France also is at risk of losing its
top-tier AAA rating with S&P soon. There was a false alarm in early November
where the ratings agency "mistakenly" downgraded France, but rumors are that
one of the three firms will make that move eventually (and correctly) in the
next few days. What gives? Why is Australia such a safe borrower as more
developed nations continue to feel the burn? The most obvious reason is that
Australia spends much more responsibly than the U.S. and Europe. The country's
net external debt was 53% of GDP in 2010 while Italy currently is struggling
under 120% debt-to-GDP, the U.K. is approaching 80% debt-to-GDP and and many
estimate the U.S. is nearing a 100% ratio. It also helps that the nation has a
vibrant economy thanks to its close proximity to emerging markets in Asia, and
strategic partnerships with China helps a great deal. Australia has been able to
tap into the economic might of Asia and is one of the few major economies that
avoided the technical definition of a recession amid the financial crisis. Just
barely, of course, since its economy grew a mere 0.4% in the first three months
of 2009 but the textbook guidelines for a recession are two consecutive
quarters of GDP contraction, and the tiny gain was enough to avoid the dreaded R
word. The nation also is very rich in natural resources. Australia is a major
exporter of agricultural products like wheat, minerals like gold and energy
commodities such as coal. Mining and agriculture make up more than half of
Australia's exports. While other countries have waxed and waned based on
specific industries housing, technology and the like Australia has benefited
from baseline demand in food and energy that never evaporates, even during a
downturn. How to Invest in Australia There are two Australian ETFs to play the
region. The first is the liquid iShares MSCI Australia Index Fund (NYSE: EWA ),
with more than $2 billion under management. The next is the tiny, volatile Index
IQ Australia Small Cap ETF