Moody's Investors Service has reported on Monday that Australia's building societies are standing on solid ground with anticipated growths in their deposit base as the country's economy is on its way to further recovery.

The global ratings agency said that Heritage Building Society and Rock Building Society are currently enjoying A3 and BAA3 long term deposit ratings respectively with both societies looking forward for stable growth prospects while Newcastle Permanent Building Society has been rated with A2 long term deposit but with a gloomy outlook.

Moody's said that the building societies were able to recover this year with much help from better deposit bases, conservative business models and upbeat home market franchises following weak gains in loan and deposit in 2009.

The agency said that further influx of customer deposits, which surged up to 68 percent, has supported funding across the sector in the same year while the anticipated better unemployment conditions in 2010 are expected to increase the sector's credit quality.

Also, Moody's said that the sector's asset quality metrics have gained better stability while impairment levels have been kept at a minimal level, as it stressed that the societies' "ratio of non-performing loans to gross loans of 0.2 per cent would need to quadruple before moving out of Moody's highest asset quality category."

The agency has noted though that the country's building societies must implement rigid cost-cutting measures across the sector in order to maintain semblance of profitability as spectre of stiffer competition and higher funding costs have started setting in.

Moody's pointed out that the societies' loan books are still overwhelmed by residential mortgages which had exposed them to the effects of rising interest rates and high levels of consumer debt in Australia.