Credit agency Moody's Investors Service on Monday affirmed Australia's top rating for its government debt citing the country's strong economic outlook despite a risky local bank's borrowing overseas.

In a statement, Moody's said that Australia's 'AAA' rating remains stable noting the country's strong economic performance, very high economic resiliency, very high government financial strength, and very low susceptibility to event risk.

"In particular, the framework for fiscal policy is transparent and has, until now, consistently kept government debt at low levels," the agency added.

However, Moody's cited Australia's banks vulnerability due to its dependence on foreign banking. But this provides very low risk, said Moody's.

"The large size of the country's negative net international investment position is a vulnerability in times of global financial market stress," it said.

Moody's also expressed confidence the Australian government can bring the economy back to a surplus because of its low level of debt. Next week, the government is scheduled to announce its annual budget where the Labor government is expected to announce its plan to return the budget to surplus by 2012/13.

Australia registered a huge deficit at the height of the global financial crisis.

The statement added, "Whether it reaches a balanced position in 2012-13 -- as targeted by the government -- or somewhat later is not important as long as the improving trend is in place. Because of its low debt levels, the government has some leeway in this regard."

Moody's predicted Australia's economy to expand 3.5 percent this year, up from 2.6 percent in last year as it credits the strong Asian demand for the country's commodity exports.

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