Standard & Poor’s (S&P) advice on the outlook of Australia’s triple-A credit rating highlights the need for the Government to live within its means and continue with the task of reducing debt and deficit and growing the economy.
Australia's credit rating remains at triple-A and S&P have confirmed the underlying strength of the Australian economy.
The S&P advice also contains positive views about Australia:
- Only one key rating factor is a weakness and that is external assessment;
- Our external borrowings are largely private and reflect productive investment;
- Our banking system is one of the strongest globally;
- And Australia possesses a high degree of monetary credibility.
Australia’s economy remains strong. The Australian economy recorded 3.1 per cent growth in the year to March – better than any of the G7 economies, and well above the OECD average.
Almost 300,000 new jobs were created in 2015 — the strongest growth in a calendar year since 2007.
However S&P have raised concerns that they believe the uncertain outcome of the election means the Parliament may slow the pace of fiscal consolidation set out in the Budget and postpone the timetable to bring the Budget back into balance. S&P have urged the Parliament to pass unlegislated savings and other budget measures to improve budgetary performance.
S&P's decision to place Australia on a negative outlook as a result of the election outcome means that there is a one-in-three chance that S&P could lower the rating within the next two years.
Over the next six to 12 months S&P will continue to monitor the success or otherwise of the Government's ability to pass revenue and expenditure measures through both houses of Parliament.
The triple-A credit rating is important to our nation because government borrowing costs are likely to rise and flow through the wider economy if a downgrade actually proceeded.
The Coalition took to the election a firm plan to improve the Budget and reduce the deficit over the next four years and over the past three years have acted to repair the budget.
We remain committed to budget repair and will work with the Parliament to maintain our triple-A rating by continuing to live within in our means and making sure that every new dollar of spending is paid for with savings elsewhere in the Budget.
S&P’s advice clearly demonstrates the need for the Parliament to act in a way that will not increase the deficit, particularly during the next few years.
Higher deficits and debt over the next four years will hurt our economy and serve to realise the risk of our credit rating being downgraded.
At the election Labor put forward policies that by their own decisions would deliberately increase the cumulative budget deficit by $16.5 billion over four years.
Senior economists said during the election campaign that Labor's plans would put Australia's triple-A credit rating at risk.
The S&P advice shows that Labor’s fiscal policies are indeed a direct risk to our credit rating.
If returned to Government, the Coalition will continue pursuing its policies to grow the economy and will not risk our economic growth through policies which will retard growth at this critical time for our economic transition.
The message from S&P today is that the Government in the next term must live within its means and work to grow our economy.
We must make sure every new dollar of spending is paid for with savings elsewhere in the Budget and that we continue to grow our economy.