1 week Ago By Shane Wright
One of the world’s biggest credit ratings agencies, S&P Global, has put the major parties on notice that Australia could lose its AAA credit rating if their election promises result in larger structural budget deficits. In a statement this morning, the agency said sound budget management had underpinned Australia’s AAA rating for years. Change in net general government debt – which includes the federal and state governments – had averaged just 2 per cent of GDP since the global financial crisis of 2008-09.
Treasurer Dr Jim Chalmers during a doorstop interview following the final leaders’ debate. Credit: Alex Ellinghausen But S&P believes growing risks to the global economy, plus the use by both parties of off-budget commitments to meet their spending pledges, was putting the budget under risk. “The budget is already regressing to moderate deficits as public spending hits post-war highs, global trade tensions intensify, and growth slows,” it said, “how the elected government funds its campaign pledges and rising spending will be crucial for maintaining the rating.
” According to the agency, “lax fiscal discipline at the state level” – of the states and territories, only WA has a triple-A rating – on top of the turmoil created by Donald Trump’s tariff war and growing demands in federally supported areas such as the NDIS, defence, health and aged care would likely increase general government deficits. “If major election commitments aren’t funded via additional revenues or savings, the deficit could widen further,” it said. Another concern raised by the agency is the use of off-budget items for major spending.
The Albanese government has created several, such as its $19 billion Rewiring the Nation Fund and its $10 billion Housing Australia Fund. Peter Dutton is promising to axe both of these funds, but has promised to create his own Regional Australia Future Fund and a Future Generations Fund. S&P said the use of these funds was “increasingly obfuscating Australia’s fiscal position and borrowing needs”.
In the March 25 budget, Treasurer Jim Chalmers forecast a deficit of $27.6 billion for the current financial year, widening to $42.1 billion in 2025-26.
The budget is expected to remain in deficit for the rest of the decade and well into the 2030s. Australia is one of only 11 nations, out of 139, with a AAA credit rating – Canada, Denmark and Germany are some of the others. The United States does not have the highest rating, losing it during Barack Obama’s presidency, while Australia has had its current rating since 2003.
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